TRIUMPHAL FOUNTAIN LTD. AND ANOTHER v. CHAN CHI LUN AND OTHERS

Head Note

Building Management - Estoppel by conduct - Representation - Paragraph 11 of Second Schedule of Buildings Management Ordinance Cap. 344 - Review

LDBM 309/2001

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 309 of 2001

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DECISION ON REVIEW

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Introduction

1. This is an application for a review made by the Applicants by summons on 14th November 2001 under Section 11A of the Lands Tribunal Ordinance, Cap. 17 of the decision of this Tribunal given on 19th October 2001 ("the Judgment"). Section 11A provides:-

"11A. (1) The Tribunal may, within 1 month from the date of any decision by it, decide to review that decision and, on such grounds as it may think sufficient, may set aside, reverse, vary or confirm it.

(2) The Tribunal may act under subsection (1)

(a) on the application of any party; or

(b) on its motion,

and on notice to all other parties to the proceedings. "

2. At the hearing the Respondents were not present and the Applicants had changed its solicitors. There was an affirmation of service by one Mr. Hung Kwok Shing, clerk of the Applicants' previous solicitors that the Respondents had by letter dated 19th November 2001 sent under ordinary post purportedly served the Applicants' summons on the Respondents. That affirmation did not state whether the letter dated 19th November 2001 had been returned. Mr. Fung of the Applicants' solicitors informed me that he was also under the employ of the Applicants' previous solicitors and had personal care of the present case. He could confirm that there was no return of the letter dated 19th November 2001.

3. It was unfortunate that the summons did not state the grounds of the Applicants' application. On this score the Respondents may or may not wish to consider the Applicants' application was defective. However, since the Respondents were not present I would say no more than that in the interest of justice I had allowed the Applicants to make their submission on their grounds for review.

4. The Applicants had from the outset been represented by solicitors and this went as early as shortly prior to the meeting on 17 August 2000 where the Resolution was under attack.

Applicants' Grounds for review

5. The Applicants put forward the following grounds for their application for review :-

(a) that there was no estoppel for a number of reasons, and the Applicants also relied upon the case of Bestkey Development Limited v. Incorporated Owners of Fine Mansion and another [1999] 2 HKLRD 662;

(b) that there was a number of evidential aspects which would assist them.

The Proper Approach in review

6. Section 11A(1) of the Lands Tribunal Ordinance provides that this Tribunal may review its decision and "on such grounds as it may think sufficient" may set aside, reverse, vary or confirm it.

7. Under Section 11A(4) of the same Ordinance, the Tribunal may, in any review, hear and receive any decision it thinks fit for the purpose of determining the issue between the parties.

8. No doubt the Tribunal has a discretion to exercise its jurisdiction to review its decision where there has been a trial or hearing on merits. Upon what principles then should this jurisdiction in this case ought to be exercised ? In my judgment, Section 11A was designed to do justice between parties. It is an injustice to the winning party to be deprived of the fruits of the judgment. If the losing party is allowed to merely repeat what it had already said in the previous hearing this can amount to an abuse. If a party is allowed to adduce new evidence at the review hearing and such evidence could be obtained with reasonable diligence for use at the hearing, this could also amount to abuse. The exception is perhaps where the opposing party is not taken by surprise.

9. On the other hand justice must be done and where justice clearly lies it should not prevent a party from repeating himself on important points of law and adducing evidence of material importance or even decisive notwithstanding this could have been obtained earlier. The procedure of the Tribunal was designed to be more flexible than a court where procedures and rules of evidence are expected to be followed. This view is also supported by the fact that under Section 11A(4), it is expressly provided that this Tribunal may hear decisions, and those decisions would necessarily include those decisions which had not (but should have) been put forward in this Tribunal may hear decisions, and those decisions would necessarily include those decisions which had not (but should have) been put forward in the initial hearing before the Tribunal, notwithstanding the Tribunal is being asked to look at the same issues again at the review hearing. However, in a case where the parties had all along been legally represented and with assistance of experts, the discretion to review would normally be exercised more stringently than say where parties were unrepresented at the initial hearing.

Approach in the present case

10. What then is the scope for review in a case such as the present one ? This is a case for determination of rights between property owners of a Building in the context of establishing an owners incorporation. No experts had been engaged. Each of the Applicants owned some of the commercial units either on the Ground or the First Floor. Together they controlled some 36.28% of the undivided shares of the land. The Applicants were previously related to the developer of the land where the building was erected. The Deed of Mutual Covenant ("DMC") provided for engagement of the management company, namely the Manager, which was controlled by the 2nd Applicant. The Manager had managed the Building from its inception. The Respondents said they wished to establish an owners incorporation because of existing problems of management of the Building, including matters such as hygiene and security. The Respondents were supported by almost all other owners (excluding the Applicants) as to the establishment of the owners incorporation.

11. The Applicants stood in a relatively better position to provide evidence necessary for determination of the condition of the Building including management matters. They chose not to dispute the allegations in relation to hygiene and security as the need for establishing the owners incorporation. Indeed at the review hearing, the Applicants' legal representative had informed me that the Applicants was not opposing to establish the owners incorporation but merely wanted to have a seat in the management committee as they had a substantial interest in the Building. Another matter is authenticity of the owners present at the meeting on 17 August 2000. The 2nd Applicant is the proprietor of the Manager for many years. He had independant means to ascertain identity of the owners on 17 August 2000.

12. In my judgment, it would be appropriate that this Tribunal should proceed on the following exercise :-

(a) if there be new evidence adduced in relation to authority and authenticity of those present on 17 August 2000 or the hygiene or security conditions of the Building, then that evidence must be evidence which is of material importance or decisive, and could not be obtained with reasonable diligence for use at the hearing, otherwise there ought to be a proper explanation from those who seek to adduce that evidence as to the delay of adducing it ;

(b) if there be no proper explanation of the delay, then in the absence of fresh arguments on point(s) of law, this Tribunal should be slow in exercising its jurisdiction to review ;

(c) if there be proper explanation of the delay, then this Tribunal should proceed to review its decision.

13. At the hearing of the review application, the Applicants sought to clarify on a number of matters relating to evidence but rightly did not seek to adduce any new evidence, including the above matters. The Applicants also sought to submit on law in relation to estoppel. In the exercise of my discretion, I granted leave to the Applicants to provide a written submission on that aspect. To this I am grateful for the effort of Mr. Fung who had put forward a written submission on his client's case.

Estoppel

14. Mr. Fung submitted on behalf of the Applicants that the complaints of the Respondents amounted to either "promissory" or "equitable" estoppel. In his written submission, Mr. Fung relied upon the authority in Chitty on Contract 28th Ed. Para. 3-081 :-

"For the equitable doctrine to operate there must be a legal relationship giving rise to rights and duties between the parties; a promise or a representation by one part that he will not enforce against the other his strict legal rights arising out of that relationship; an intention on the part of the former party that the latter will rely on the representation; and such reliance by the latter party. Even if these requirements are satisfied, the operation of the doctrine may be excluded if it is, nevertheless, not "inequitable" for the first party to go back on his promise".

15. The Applicants complained that there was no clear or unequivocal representation. They suggested that on the evidence Madam Mak merely complained about the following conduct :-

(a) that the 2nd Applicant said before the owners' meeting in June 2000 (which date was incorrectly stated in the written submission as 17th August 2000) that he would not participate in the establishment of an owners' incorporation ; and

(b) that the representatives of the 1st Applicant and the 2nd Applicant himself first came to the meeting of the owners on 17th August 2000 to object to the authenticity and authority of those present and left, but later on returned to the meeting and took part in the election of the management committee.

16. The Applicants then said that :-

(a) it is not clear in Madam Mak's evidence the capacity of the 2nd Applicant when he stated that he would not participate in the establishment of an owners incorporation ;

(b) this representation was not applicable on the part of the 1st Applicant.

17. I believe the Applicants were narrow in their argument in merely referring to the doctrine of promissory estoppel. Promissory estoppel or estoppel by representation is a species of estoppel in pais. Estoppel in pais also includes estoppel by statement or words, and estoppel by conduct. Promissory Estoppel is generally accepted to be different from Estoppel in pais in that in the case of promissory estoppel, the representation relied upon by the Respondents need not be one of present fact (and arguably, law). See Halsbury's Laws of England 4th Ed. 1992 Reissue Vol.16 Paras. 955, 1038, 1071 .

18. The doctrine of estoppel by pais may be stated as follows : where a person has by words or conduct made to another a clear and unequivocal representation of fact, either with knowledge of its falsehood or with the intention that it should not be acted upon, or has so conducted himself that another would, as a reasonable person, understand that a certain representation of fact was intended to be acted upon, and the other person has acted upon such representation and thereby altered his position to his prejudice, an estoppel arises against the party who made the representation, and he is not allowed to aver that the fact is otherwise than he represented it to be. See Halsbury's Laws of England 4th Ed. 1992 Reissue Vol.16 Para. 955 .

19. As to the question whether a course of conduct, negligent or otherwise, amounts to a representation, or is such a reasonable person would take to be a representation meant to be acted on in a certain way, must vary with each particular case. See Halsbury's Laws of England 4th Ed. 1992 Reissue Vol.16 Para. 1055 .

20. What then is the representation, statement or conduct or the course of conduct in the present case ? In my judgment this question can be answered with one difference between the 1st and 2nd Applicants :-

(a) in the case of the 2nd Applicants, the representation, statement or conduct occurred in two occasions, namely, at the owners' meeting in June 2000 and his conduct in change of stance on 17 August 2000 ;

(b) in the case of the 1st Applicant, the representation was made by its representatives including one Miss To Hop, a staff of the Manager (who in turned was controlled by the 2nd Applicant) in its change of stance (together with the 2nd Applicant) on 17 August 2000.

Owners Meeting in June 2000 and Capacity of 2nd Applicant

21. The Applicants had made a factual mistake that the representation that the 2nd Applicant had represented that he would not participate in the establishment of the owners incorporation on 17 August 2000. The evidence was that this representation was made at an earlier meeting in June 2000. Secondly, it is a question of fact whether the 2nd Applicant was speaking at the owners' meeting in his capacity as owner or as the representative of the Manager, one Tong Mou Property Dealing Company Limited, under the DMC. The Applicants said that the 2nd Applicant might only represent the Manager (and not himself as an owner of the Building) and he made the representation that the Manager would not participate in establishing an owners incorporation.

22. In my judgment this argument has little support in the context of the owners meeting in June 2000. The 2nd Applicant was the chairman of the owners meeting when he made the oral representation. Secondly, the Manager has never any right nor vote in the establishment of an owners incorporation. Thirdly, I accept Madam Mak's evidence including her witness statement on this aspect. She said the oral representation was made by the 2nd Applicant when he was chairing an owners' meeting and in his capacity as director of the Manager. Prima facie, in the absence of evidence to the contrary, the 2nd Applicant must have held himself out to the owners at their meeting in both capacities, unless he made himself clear about his capacity at that meeting. Certainly the owners at the meeting had treated the 2nd Applicant was acting in such capacity. In the present case the 2nd Applicant had not given evidence.

23. The 2nd Applicant as the proprietor of the Manager and chairman of the owners meeting. Clause 20 of the DMC provides for the meeting of the owners committee, and I do not see the difference between the owners meeting and the owners committee meeting in the way the Applicants are advancing their case, may resolve to form an incorporated owners. The 2nd Applicant was chairman of the owners committee meeting in June 2000. He had the duty to properly convene that meeting and yet he had chosen not to participate (or in his words "參與") in the establishment of an owners incorporation. The 2nd Applicant is the proprietor and the owner of Shop 1 on Ground Floor with 26 out of the 350 undivided shares, or 7.4% in the land where the Building was erected. He stood in a better position than the residential owners who each had 11, with the exception of one instance (14), undivided shares. He could have convened a meeting to establish the management committee by himself under Sections 3(1)(a) and (c) of the Building Management Ordinance Cap. 344. In the context of the present case, the 2nd Applicant's statement at the owners' meeting that he would not participate in the establishment of an owners incorporation should be taken more widely. There is no evidence from the 2nd Applicant that he took any steps in alerting Madam Mak to stop to convene the meeting on 17 August 2000. Certainly if he had participated he would normally be expected to convene the meeting as required under Section 3 of the Building Management Ordinance Cap.344. He would be expected to be a member of the management committee, if the owners had chosen to elect him. In the special circumstances of this case, his statement in relation to his "participation" was intended to be extended to his appointment as member of the management committee. However, this representation of the 2nd Applicant did not form the particular estoppel against him in my Judgment. This representation of his should not prevent him from disputing authority and authenticity of those present on 17 August 2000.

17 August 2000 meeting

24. The representation that is in question was the unequivocal conduct in the change in position by the 2nd Applicant on 17 August 2000. On that day he openly objected to the identity and authority of those present at the meeting of the owners to be held. He had the means to identify who would be the owner of a particular unit of the Building. He was accompanied by legal representative. There is no suggestion that he did not have sufficient legal advice. There was no doubt that he was aware of his rights. He was accompanied by at least one of his staff representing the 1st Applicant. He made a scene. If his then objections in relation to authority and authenticity were correct, he should not have taken part and be counted to vote in the establishment of the owners incorporation nor management committee. However, he then changed in his position. He took part in the proceedings and his vote was counted. This was not a situation where the 2nd Applicant had granted some indulgence by failing to insist on the meeting to go on. This was a situation where the 2nd Applicant had returned and faithfully taken part in the proceedings of the meeting and cast his votes. Only when he found that he did not have popular support had he now turn to a court of justice. In the context of this case, I am satisfied as a fact that by the time he returned to take part at the meeting and cast his vote, the 2nd Applicant must have satisfied himself as to identity and authority of those present. The fact was that the Applicants had represented to the other owners (including the Respondents) unequivocally, that they had satisfied themselves with the authenticity and authority of those present.

25. It should be understood that generally and in the circumstances of this case, the right to vote by a property owner in the establishment of an owners incorporation is a valuable right to benefit from the management of the Building. In allowing the 2nd Applicant's vote, the rights of other owners were prejudiced as the outcome of the meeting might have been different. The 2nd Applicant would have been estopped to dispute both identity and authority of those present on 17 August 2000.

Waiver of the 2nd Applicant

26. I would also be prepared to hold that the 2nd Applicant had waived his right as to authority and authenticity in the circumstances of this case, that in the context of the evidence available, the 2nd Applicant had shown himself to have done in clear and unambiguous terms. His conduct was clear or certain to raise an estoppel and also sufficient give rise to a claim of waiver.

The 1st Applicant

27. The representation of the 1stApplicant is that they had represented in the same way as the 2nd Applicant had on 17 August 2000. The same line of reason applies.

Reliance

28. The Applicants also submitted that there is no evidence of reliance by the Respondents as to the representations of the Applicants on 17 August 2000. To this the answer is clearly that if there was no reliance, the Applicant's votes would not have been counted.

Detriment

29. The Applicants also said that it was not inequitable if the Applicants were allowed to go back to their original position. Bestkey Development Limited v. Incorporated Owners of Fine Mansion and another [1999] 2 HKLRD 662 was relied upon to show that there must be detriment to the Respondents and there is no evidence of detriment. The test of detriment in Bestkey at p. 668 H per Liu JA was "whether it would be unjust or unconscionable for the [Applicants] now to be allowed to resile from [their] representation having regard to what the representees and their successor-in-title had done in reliance of them". The object of the Applicants on 17 August 2000 was to obstruct the holding of the meeting. The effect of this, if the Applicants had succeeded, would be the 2nd Applicant could continue to be the Manager and the management would not be improved. The 1st Applicant was running a bakery and apparently the complaints about management, security and hygiene were somehow directed at them.

30. It might be true that the meeting would go ahead whether or not the Applicants had participated. However, to allow the Applicants to participate and casting their votes is altogether a different matter. Voting rights of the owners in the management of the common areas and other parts of the Building under the DMC would affect value of individual property and must be considered as valuable rights. The detriment suffered by the other owners was clearly their waiver of their existing rights to vote without any participation of the votes of the Applicants.

31. At the review hearing, the Applicants indicated that they did not oppose to the establishment of the owners incorporation. However, they said they were content that their votes at the meeting on 17 August 2000 should be considered as invalid, if their grounds (including those under Paragraph 3(d)(ii) of the Notice of Application that the proxies were invalid) were accepted. If that be right, this would result in the whole of the meeting being invalidated.

32. I find the Applicants' position clearly illustrates the disingenuous nature of their present application. They did not want an owners incorporation. They insisted that they should have a seat in the management committee, otherwise they would prefer the status quo to remain so that the 2nd Applicant could still run the management of the common areas of the Building. However, I do not see how their wishes can be successful and how this Tribunal can interfere if the owners did not wish to vote in the Applicants' favour.

33. In the circumstances, I would reject the arguments of the Applicants on estoppel.

Applicants' further comments on evidence

34. The Applicants had also repeated their comments on evidence, and in so far as this is a repetition of their final submissions, these have been considered and I do not propose to deal with them again.

35. The Applicants further complained that on the evidence, Mr. Mak Tse Lok had failed to disclose to the meeting on 17 August 2001 that he was not the registered owner but only an authorized representative with a proxy. The answer to this is Clause 11 of Schedule 2 of the Building Management Ordinance which provides that an authorized representative stands in the same position as if he is himself the owner :-

"11. (1) Notwithstanding any provision in a deed of mutual covenant to the contrary, where an owner or other person, being a body corporate, is appointed as a member of a management committee under this Schedule that body corporate may appoint a director or other officer of that body or some other individual to act as its representative ("authorized representative" (獲授權代表)) for the purposes of this Ordinance as if the authorized representative were a member of the management committee in his own right and, if so appointed, paragraph 4(2)(a), (b), (c), (d) and (f) shall apply to the authorized representative."

Conclusion

36. I would therefore give judgment in favour of the Respondents and dismissed the application for review of the Applicants. I would make an order nisi that there be no order as to costs and give leave to both parties to apply to vary the costs order within 14 days if they intend to apply.