JIKAN DEVELOPMENT LTD v. THE INCORPORATED OWNERS OF MILLION FORTUNE INDUSTRIAL CENTRE AND OTHERS

[English Translation – 英譯本]
LDBM 244/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

 BUILDING MANAGEMENT APPLICATION
NO. 244 OF 2000

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BETWEEN

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JUDGMENT

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1. The applicant is one of the owners of Million Fortune Industrial Centre (“the Building”) located at 34-36 Chai Wan Kok Street, Tsuen Wan.  The first respondent is the Incorporated Owners of the Building, and the second to tenth respondents are, respectively, the chairman, secretary, treasurer and committee members of the management committee of the Incorporated Owners.  The applicant is applying to this Tribunal for the following orders:

“(a) An Order that the Management Committee of Million Fortune Industrial Centre be dissolved and an Administrator be appointed under section 31(1) of the Building Management Ordinance, Cap. 344;

(b) An Order that the Incorporated Owners of Million Fortune Industrial Centre forthwith conduct a tender exercise to choose a solicitors firm to represent it in High Court Action No. A14915 of 1998 and/or subsequent appeal thereto, pursuant to the Code of Practice enacted under section 44 of the Building Management Ordinance, Cap. 344.”

2. The first issue for determination is whether the applicant is taking action against the correct Respondents.  Mr Bok, Counsel for the applicant, stated in his submission that “The Application is against 1^st Respondent on basis of the provisions under s.16 of the BMO and against 2^nd to 10^th Respondents on basis that they form the current Management Committee of the 1^st Respondent.”  Section 16 of the Building Management Ordinance (Cap.344) (“BMO”) provides as follows:

“Section 16      Rights etc. of owners to be exercised etc. by corporation

When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, and accordingly ―

(a) any notice, order or other document which relates to any of the common parts of the building may be served upon the corporation at its registered office; and

(b) any proceedings in the tribunal in respect of any of the common parts of the building may be brought and pursued by or against the corporation.”

3. The applicant’s application concerns proceedings for the dissolution of a management committee and the appointment of an administrator.  Neither of these involves the common parts of the Building, and therefore Section 16 does not apply to the present case.

4. The present application is made pursuant to Section 31(1) of the BMO and therefore has to comply with that subsection.  Section 31 provides as follows:

“31. Appointment of administrator by the tribunal

(1) The tribunal may, upon application made to it by ―

(a) an owner;

(b) a registered mortgagee (if any);

(c) an administrator; or

(d) the Authority or an authorized officer,

dissolve the management committee and appoint an administrator, or remove and replace an administrator, as the case may be.”

If this Tribunal makes an order dissolving the management committee, the order will have to be enforced against the management committee.  The management committee and the owners incorporation are separate entities.  Section 29 of the BMO provides that the management committee is responsible for exercising and performing on behalf of the owners incorporation the powers and duties conferred by the BMO on the corporation.  The management committee, however, is not the corporation itself.  Section 45(2) of the BMO confers on the management committee, the corporation and others the power to commence proceedings specified in Schedule 10.  This clearly shows that the management committee and the corporation are separate entities.  It follows that the management committee can certainly be made a respondent to legal proceedings.  As the present proceedings are brought pursuant to Section 31, the “management committee” must be made the respondent thereto.

5. Nothing in the BMO empowers the applicant to bring proceedings under Section 31(1) against individual committee members.  Individual members of a management committee are not to be taken as the committee itself.  The respondent to the applicant’s application must be “the 2^nd Management Committee of The Incorporated Owners of Million Fortune Industrial Centre”.  For the above reasons, this Tribunal does not have jurisdiction over the legal proceedings brought by the applicant against individual committee members.

6. The applicant applies to this Tribunal for dissolution of the management committee and appointment of an administrator.  However, as the management committee has not been made a respondent, the application stands to be dismissed.

7. Assuming the management committee has been made a respondent, I proceed to consider the application as follows.

8. The owners incorporation of the Building was formed on 29 October 1997.  The term of office of its 1^st Management Committee expired on 17 April 2000.  The term of office of the 2^nd Management Committee (“the 2^nd Committee”) started to run on 17 April 2000, and the Applicant commenced the present proceedings on 25 July 2000.  The Notice of Application sets out four grounds for dissolving the 2^nd Committee.

9. The applicant’s first ground for dissolving the 2^nd Committee

          The applicant alleged that the 2^nd Committee failed to maintain proper records of account in accordance with Section 27(1) of the BMO.  For this reason, the applicant commenced an action in the High Court by way of summons on 3 September 1998 (HC Action No. 11384/99), seeking a court order compelling the Incorporated Owners to prepare records of account.  On 11 July 2000, the Court of First Instance gave judgment in favour of the applicant in respect of some of the claims in HCA 11384/99.

10. The applicant’s second ground for dissolving the 2^nd Committee

The applicant alleged that the 2^nd Committee held a meeting on 10 February 1998, at which certain resolutions were passed.  Paragraph 10(4A) of Schedule 2 to the BMO provides that the minutes of every meeting of a management committee shall be certified by the person presiding over the meeting as containing a true record of the proceedings of the meeting to which they relate.

10.1 On 23 July 1998, the 2^nd Committee convened an owners’ general meeting and passed resolutions thereat.  Paragraph 6(2) of Schedule 3 to the BMO provides that the minutes of a general meeting shall be certified by the person presiding over the meeting as containing a true record of the proceedings of the general meeting to which they relate.

10.2 In the present case, the two sets of minutes of the aforesaid two meetings have not been certified in accordance with the BMO.  However, certification of minutes is done by the person presiding over the meeting, and a failure to certify the minutes is the fault of an individual committee member rather than the fault of all committee members.  Furthermore, such a fault is a minor one.

10.3             The applicant alleged that, although the aforesaid wrongful act was done by members of the 1^st Management Committee, many of the members of that committee are also members of the 2^nd Committee, and the second respondent serves as chairman of both Management Committees.  This allegation is misconceived.  A wrongful act done by the 1^st Management Committee is not an act done by the 2^nd Committee, and the latter is not liable for the act of the former.

11. The applicant’s third ground for dissolving the 2^nd Committee

The applicant pointed out that the Incorporated Owners commenced an action against the applicant in the High Court on 6 September 1998 (HC Action No. A14915/98).  The Incorporated Owners were then represented by Messrs. Ho & Tam, but the services of this solicitors firm had not been procured by invitation to tender as required by Section 20A(1) and (2) of the BMO and the relevant Code of Practice.  The applicant contended that, although HC Action No. A14915/98 was initiated by the 1^st Management Committee, it was wrong for the 2^nd Committee to continue with the High Court action with knowledge of the above defect.

11.1 Section 20A of the BMO provides as follows:

“20A.   Supplies, goods and services

(1) The procurement of all supplies, goods or services required by a corporation in the exercise of its powers and the performance of its duties under the deed of mutual covenant (if any) or this Ordinance shall comply with such standards and guidelines as may be specified in a Code of Practice relating to such procurement.

(2)        Any supplies, goods or services referred to in subsection (1) the value of which exceeds or is likely to exceed ―

(a)     the sum of $100,000 or such other sum in substitution therefor as the Authority may specify by notice in the Gazette; or

(b)     a sum which is equivalent to 20% of the annual budget of the corporation or such other percentage in substitution therefor as the corporation may by resolution pass at a general meeting of the corporation authorize,

whichever is the lesser, shall be procured by invitation to tender.

(3) The procurement of any supplies, goods or services by invitation to tender in accordance with subsection (2), and the tender procedures in respect thereof, shall comply with such standards and guidelines as may be specified in a Code of Practice relating to such procurement and tender procedures.

(4) …”

11.2 In Pokfulam Development Company Limited & Ors. v. The Incorporated Owners of Scenic Villas (LDBM 70/2000), I held, after close analysis, that Section 20A(1) is merely a directory provision.  The analysis equally applies to Section 20A(2) and (3).  The relevant Code of Practice is not a rule of law, and therefore a breach of the standards and guidelines specified in that Code is not a breach of the law.  As Sections 20A(1), (2) and (3) are merely directory, the 1^st Management Committee was under no duty to comply with the provisions thereof.  This means that the 1^st Management Committee had not made any error in appointing Messrs. Ho & Tam.

11.3 Even if Section 20A were mandatory so that the appointment of Messrs. Ho & Tam by the 1^st Management Committee could be impugned, this had nothing to do with the 2^nd Committee.  It is the applicant’s contention that the 2^nd Committee was wrong in continuing with High Court Action No. A14915/98 with knowledge of the above defect.  The 1^st Management Committee’s act of appointing Messrs. Ho & Tam was completed in September 1998, and from that time onwards the solicitors firm provided services to the Incorporated Owners, and therefore the 2^nd Committee cannot be held responsible for the above act.  The 2^nd Committee cannot remedy a past mistake, because bygones are bygones.  “Knowing a mistake made by the 1^st Management Committee” is not per se a wrongful act, nor is continuing with the litigation.  The two matters should not be mixed up.  It is incorrect for the applicant to say that the 2^nd Committee was wrong in continuing with the litigation with knowledge of a past mistake.

12. The applicant's fourth ground for dissolving the 2^nd Committee

The applicant complained that individual members of the 2^nd Committee abused their positions and were derelict in duty.

12.1 The applicant said that, at the hearing of HCA No. A14915/1998 from 25 to 27 October 2000, the second respondent admitted that he had parked his car at common areas of the Building without paying parking fees whereas others had to pay such fees for parking their vehicles at the carpark of the Building.  The second respondent admitted that this was a privilege or benefit that the chairman of the Incorporated Owners enjoyed, and that no approval for such conduct had been obtained from the 2^nd Committee.  The applicant contended that the second respondent could have been convicted of an offence under Section 9(1)(a) of the Prevention of Bribery Ordinance for his conduct, and that the failure of the 2^nd Committee to restrain the second respondent from such conduct, of which the 2^nd Committee had knowledge, amounted to a dereliction of duty.  Although the 2^nd Committee did not so restrain him, the second respondent ceased the above wrongful conduct on 7 December 2000.  The 2^nd Committee’s liability in this respect is therefore confined to the period from 17 April 2000 to 7 December 2000.  Although the mistake was not negligible, it was not such as to render it necessary to dissolve the 2^nd Committee.

12.2 Section 9(1)(a) of the Prevention of Bribery Ordinance provides as follows:

“(1)      Any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his ―

(a)     doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business […],

shall be guilty of an offence.”

The second respondent had not solicited or accepted any advantage, and hence Section 9(1)(a) does not apply to him.

12.3 The applicant said that the second respondent’s wife and daughter enjoyed parking at an hourly rate and were given three months in which to pay the fees, whereas others had to pay fees without delay.  The second respondent replied that the manager of the Building (Plotio Property & Management Company Limited (transliteration)) did not require him to pay parking fees immediately and said he could wait until he received the bills.  I accept his evidence.  I do not see any problem with this arrangement which was made with the manager’s consent.

12.4 The applicant also said that the second respondent watered the plants using water for common use and did not pay for that.  There are 16 branch meters at the Building to record the usage of water for common use.  These meters are catered for owners who consume a large amount of water, and they pay according to the records shown on the meters.  There is another common meter at the Building to record the usage by others of water for common use, and the water charges for such usage are settled out of the management fees.  The second respondent’s use of water for common use was recorded by the common meter, and so he was not using the water free of charge.

12.5 The applicant alleged that the second respondent retrospectively stated in the logbook of the Building that he parked his car there for the purposes of the Incorporated Owners.  The applicant has not provided any cogent evidence to support this allegation.

12.6 The applicant alleged that the second respondent directed the manager to restrain the other owners and tenants from obstructing the fire escapes, but he closed the door of the fire escape from his office.  The second respondent admitted this but explained by saying that, when the applicant sold the Building back in 1989, it represented that those who purchased a whole floor could use that floor exclusively, including the lift lobby and common areas nearby, and for the past 11 years this had been the way in which purchasers of a whole floor of the Building used the floor.

12.7 The applicant alleged that there were illegal structures at the second respondent’s property on the 1^st Floor of the Building.  He built a canopy to prevent dirty water from flowing in his property from the courtyard and prevent rubbish from falling onto the exposed portion of his property.

12.8 The applicant alleged that the second respondent engaged a part-time worker and a full-time worker in the absence of a resolution by the 2^nd Committee approving the same.  However, resolutions approving such engagements had been passed by the Committee on 4 August 2000 and 7 February 2001 respectively.

12.9 The second respondent directed Mr Law to recover outstanding management fees from owners, but the second respondent himself defaulted on management fees for as long as three months.  The second respondent said that the Incorporated Owners would only take action against owners who defaulted on management fees for over three months.

13. The applicant has only been able to show that the members of the 2^nd Committee were derelict in duty in failing to restrain the second respondent from parking his car in the common area of the Building free of charge.  None of the applicant’s other allegations are made out.  The acts complained of were all done by the second respondent in his capacity as an owner and had nothing to do with the 2^nd Committee.

14. The applicant also alleged that some of the members of the 2^nd Committee built illegal structures in the common areas of the Building which caused obstruction.  This, however, was done by the committee members in their capacity as owners and not by the 2^nd Committee, which should not be held liable therefor.

15. In determining whether or not a management committee is to be dissolved, the most important consideration is whether it is able to perform the duties imposed on it by the deed of mutual covenant and comply with the provisions of the BMO.  In performing these functions, it is impossible not to make mistakes, but unless they are serious, they should not justify dissolution of the management committee.

16. The second respondent has produced photographs to show the improvements made by the 2^nd Committee to the common facilities of the Building.  I accept such evidence.  In my view, it will be wrong to order that the 2^nd Committee be dissolved.

17. For the above reasons, I dismiss all applications made by the applicant herein.

18. Costs

I make an order nisi that the applicant is to pay costs of all the respondents in the present case (including costs in instructing Counsel), such costs to be taxed on High Court scale if not agreed.  If no application is made by any party within 14 days, this costs order will become absolute.