TZENG LI WEN JUDY v. TAM LUP WAI FRANKY AND OTHERS

[English Translation – 英譯本]
LDBM 272 of 2012

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. 272 of 2012

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JUDGMENT

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1.  This is an application by the Respondents to strike out this action on the grounds that the Applicant’s claim:

(a) is scandalous, frivolous or vexatious;

(b) may prejudice, embarrass or delay the fair trial of the action; and/or

(c) is an abuse of the process of the Tribunal.

2.  The Applicant opposes the aforesaid striking-out application.

Background

3.  This action concerns May Fair Court situated at Yau Yat Chuen in Kowloon Tong. May Fair Court is a small housing estate with only 15 owners.

4.  The 3^rd Respondent is the Incorporated Owners of May Fair Court. The Applicant (“Ms Tzeng”) is the owner of Flat 1A and the treasurer of the Management Committee of the Incorporated Owners; the 1^st Respondent (“Mr. Tam”) is the owner of Flat 1E and the chairman of the Management Committee; and the 2^nd Respondent (“Mr. Chu”) is the owner of Flat 2A and the secretary of the Management Committee.

5.  Ms Tzeng commenced this action:

(1) alleging that the Management Committee has not met at least once in every period of 3 months as required by paragraph 7 of Schedule 2 to the Building Management Ordinance (“BMO”).

(2) alleging that the secretary has neither given nor posted notice of any meeting, contrary to paragraph 8(2) of Schedule 2 to the BMO.

(3) asking the Tribunal to “make a ruling on the legality or otherwise of the corporation’s affairs over the past year or so”.  

6.  The Notice of Opposition filed by the Respondents states that:

(1) May Fair Court has only a few owners and they know each other. The pending management affairs of the housing estate are limited and there are no issues over which it is necessary for the Management Committee to meet and deal with.

(2) It is with the consent of all members of the Management Committee that it does not meet once in every period of 3 months.

(3) The chairman “may” convene a meeting pursuant to paragraph 8 of Schedule 2, but no owners or members (including Ms Tzeng) requested the chairman to hold a meeting.

(4) According to section 8(1)(b) of Schedule 2, the secretary shall convene a meeting only at the request of 2 members, but no members (including Ms Tzeng) requested a meeting.

(5) No written request has been made by any owner or member or Ms Tzeng for a meeting. The Lands Tribunal has no jurisdiction to order any of the Respondents to convene a meeting of the Management Committee.

(6) That the Management Committee has not held any meeting does not mean that all acts done by the corporation are null and void.

7.  For the purpose of this striking-out application, the parties have filed evidence by way of affidavits. Apart from reiterating their respective pleaded cases, they have also mentioned the background of this action. As the Notice of Application is the focus of the striking-out application, I shall not delve into the background information provided by the parties.

Discussion

8.  Ms Leung, Counsel for the Respondents, indicates that the sole basis being relied upon in seeking to strike out this action is that Ms Tzeng’s application is bound to fail. 

9.  Ms Leung submits that “the relevant provisions of the Building Management Ordinance do not impose any obligation on the Incorporated Owners nor individual members of the Management Committee to convene annual general meetings or management committee meetings. The obligation lies solely on the Management Committee as a legal entity.”  In other words, she submits that the obligation to hold a meeting rests with the Management Committee and that Ms Tzeng should have sued the Management Committee instead of the Incorporated Owners or the chairman or secretary of the Management Committee.

10.  Underlying Ms Leung’s submission is the proposition that a management committee is a legal entity and can be made a party to litigation. This view of the matter is apparently based on two decisions of the Lands Tribunal.

11.  In Ho Chun Sing v Mo Bo Hong (transliteration), LDBM 244/2002 (unreported, date of judgment: 9 June 2003), the Tribunal held as follows:

“Convene a meeting once in every period of 3 months

38. According to paragraph 7 of Schedule 2 to the Ordinance, a management committee shall meet at least once in every period of 3 months. The Applicant’s case is that the Management Committee has not met at least once in every period of 3 months as required by paragraph 7 of Schedule 2. The 1^st and 7^th Respondents have admitted that the Management Committee failed to meet at least once in every period of 3 months in accordance with the Ordinance because on some occasions members were unable to spare time for a meeting.

39. However, the requirement under paragraph 7 of Schedule 2 is an obligation borne by the Management Committee as a whole, not by individual members thereof. The Applicant should have taken out the present application against the Management Committee instead of individual Respondents.”       

12.  In Wong Tak Keung Stanley v The Incorporated Owners of Grenville House,LDBM 180/2011 (unreported, date of judgment: 9 September 2011), the Tribunal held as follows:

“8.(b) … There is no doubt that the Applicant has been suing the wrong party. He relies on Schedule 3 s. 1(1)(b) of the BMO. However, the provision states clearly that it is the “Management Committee” who shall convene the meeting, not the Incorporated Owners.

 (c) A Management Committee is distinguishable from an Owners Incorporation, as demonstrated by Mr. Chan when he pointed at s.45 of the BMO.

“(4) This section applies to the following persons, namely –

(a) an owner;

(aa)…

(b) …

(c) a management committee;

(d) a corporation;

(e) a manager within the meaning of Part VIA;

(f) … .”

Hence, a Management Committee, on its own, as a separate legal entity, can sue and be sued. The argument of the Applicant that one will not sue the Board of Directors of a limited company simply does not apply in building management matters.

(d) Further, I would agree with such interpretation, as stated in the following two authorities.

‘47. The undisputed fact is that, since the general meeting held on 24 July 1998, the Committee had not convened another general meeting until 29 July 2002. The Management Committee has plainly contravened the provision of paragraph 1(1)(b) of Schedule 3. However, the Applicant’s present application in this regard is made not against the Management Committee but against individual Respondents. In my view, the obligation under paragraph 1(1)(b) of Schedule 3 rests with a management committee as a whole, not with individual members. Therefore, the Applicant’s allegation against the Respondents in this regard fails [emphasis added].’

(Deputy Judge M. Wong
(as he then was) in
LDBM 244/2002)

‘43. Furthermore, under paragraph 1(1)(b) of Schedule 3, to convene an annual general meeting is an obligation that a management committee must perform [emphasis added], and it is a contravention of paragraph 1(1)(b) of Schedule 3 for the committee to decide whether to hold such a meeting punctually or at all.’

(Mr. Louis Chan,
Presiding Officer
(as he then was) in
LDBM 178/2004)”

13.  It should be noted that the issue in Wong Tak Keung Stanley was who had the obligation to convene an annual general meeting, and not who had the obligation to convene a management committee meeting.

14.  With respect, I do not agree with the argument of Ms Leung.

15.  First, the rulings of the aforesaid two cases are first instance rulings of the Lands Tribunal, i.e. on the same level as this Tribunal. As such, they are useful references but not binding on me.

16.  Quite clearly Ms Leung has overlooked other judicial cases which held that a management committee is not a legal entity.

17.  For example, in Fidelity Realty Ltd v Management Committee of The Incorporated Owners of Hong Chiang Building [2005] 1 HKLRD 412, Judge Louis Chan (as he then was) held that a management committee was not a legal entity and had no right of action. He had the following to say:

“8. Furthermore, it is also wrong to sue a management committee as a respondent as it is not a legal entity. The Building Management Ordinance, Cap. 344, has only provided a machinery for the incorporation of the owners for the time being of a building or group of buildings (s. 8). It has not allowed the incorporation of a management committee. There are provisions in the Ordinance to deal with matters relating to incorporation of the owners (ss. 9 to 13). The register of the Land Registrar contains the particulars of such corporations. The register also contains the names of some members of the management committees (s. 12(2)(d)). It however does not contain the names of all the members of the committees. The Land Registry also does not keep a separate registration or record of management committees. The registration of the names of some members of committees as part of the Land Registry’s record of the corporations does not thereby make the committees legal persons.

9. I also note that paragraph 5 of the 2^nd Schedule of the Ordinance stipulates how a management committee is to retire (except for a tenants’ representative) at the AGM of the corporation and a new committee elected. After this procedure has been carried out, the previous committee will be replaced by a new one. However, it will be a new committee of the same corporation. There are also provisions for the removal and replacement of the members of a committee (s. 14) and for the dissolution of the entire committee and the appointment of an administrator to arrange for the election of a new committee for the corporation (ss. 30 and 31). The committee as dissolved and the new committee as elected are all committees of the same corporation. In the winding up of a corporation, the members of the committee are treated as directors of a limited company (s. 33). There is no procedure for the winding up of a management committee.

10. The Ordinance also imposes a duty on a corporation to manage the common parts of the building and to enforce the obligations in a deed of mutual covenant for the control, management and administration of the building. It empowers a corporation to engage and remunerate staff as well as the chairman, vice-chairman, secretary and treasurer of the management committee (s. 18). A management committee has to maintain proper books and accounts, but such books and accounts belong to the corporation (s. 27 and 6^th Schedule). A corporation should also maintain an interest bearing bank account for the management of the building (s. 20(7)) but not a committee. The amount of management expenses to be paid by the owners is determined by the committee but paid to the corporation and not the committee (s. 21). The committee is just an organ of the corporation elected by the corporation’s members to exercise and perform the powers and duties of the corporation (s. 29).

11. I appreciate that section 45 of the Ordinance has included a management committee as a competent person to bring proceedings. It is certainly competent to bring proceedings on behalf of its corporation. I do not rule out that [sic] the possibility that a committee may bring proceedings in its own right. However, I doubt if it is proper for a committee to sue as a legal person in its own right. The fact that section 45 of the Building Management Ordinance, Cap. 344 has included a management committee as one of the persons who is competent to commence proceedings in the Tribunal under that section is, without more, insufficient to make the management committee a legal person.

12. For the above reasons, it is wrong to name a management committee as a Respondent as it is not a legal person which is capable of being sued. If a claim or allegation is being made against a corporation, the corporation should be sued. If it is only a battle between different groups of members of the corporation, the members should be named as parties. There are of course instances like the present one where the corporation should be named as a nominal Respondent so that it would be bound by the order.”

18.  In The Incorporated Owners of Kwai Wan Industrial Building v Kwai Fung Industrial Limited,LDBM 208/2002 (unreported, date of judgment: 17 February 2005), Chu J (as she then was) made a similar ruling:

“21. For my part, I am unable to agree that in law, a management committee of an incorporated owners is a legal entity distinct from the incorporated owners. The legal position of a management committee has been succinctly summarized by His Honour Judge L Chan in the recent decision of The 4^th Management Committee of the Incorporated Owners of Hanley Villas v The 2^nd Management Committee of the Incorporated Owners of Hanley Villas and the 3^rd Management Committee of the Incorporated Owners of Hanley Villas (unreported) LDBM 73 of 2004 at para. 6 as follows:

‘A management committee of an incorporated owners of a multi-storey building or a housing estate is just like the board of directors of a limited company. The company is a legal person but the board of directors is not. The fact that section 45 of the Building Management Ordinance, Cap. 344 has included a management committee as one of the persons who is competent to commence proceedings in the Tribunal under that section is, without more, insufficient to make the management committee a legal person. When the interest of the company is in issue, it is the company that can sue or be sued in its own name, not the board of directors. The board of directors is not a legal person independent of the company. The same applies to an incorporated owners and its management committee.’

22. I will additionally point out that a management committee is in essence a body of natural persons who are the officer bearers of the incorporated owners. Their appointments are regulated by the Building Management Ordinance. They are appointed for the purpose of carrying out the powers and duties of, and to make collective decisions for the incorporated owners, through and under the name of the management committee. Insofar as they are intra vires, decisions and acts taken by the members of a management committee are not only the decisions and acts of the management committee, but also those of the incorporated owners. It follows that the mere inclusion of a management committee as one of the persons competent to commence proceedings in the Lands Tribunal under section 45 of the Building Management Ordinance does not make a management committee a legal entity. It is therefore difficult to see the legal basis for a management committee being regarded as a legal entity independent from the incorporated owners.”

19.  The ruling of Chu J was later accepted by the Court of Appeal in The Incorporated Owners of Nam Shing Court v Golden Brick Investment Co Ltd,HCMP 645/2005 (unreported, date of judgment: 28 April 2005) (see paras. 16 & 17 of the judgment). On  the analyses set out in these judgments, which are in my view thorough, meticulous and highly cogent, a management committee is not a legal entity. In other words, Ms Leung’s argument that Ms Tzeng should have sued the Management Committee is untenable.

20.  Furthermore, Ms Leung’s contention is in my view at variance with the legislative intent of the BMO. 

21.  Paragraphs 7 to 9 of Schedule 2 to the BMO provide as follows:

“7. A management committee shall meet at least once in every period of 3 months.

8. (1) A meeting of a management committee –

(a) may be convened at any time by the chairman or the vice-chairman (if any) in the absence of the chairman; and

(b) shall be convened by the secretary, at the request of any 2 members thereof, within 14 days of receiving such request, and held within 21 days of receiving such request.

(2) The secretary shall, at least 7 days before the date of the meeting of the management committee, give notice of the meeting to each member of the management committee and (if the treasurer of the management committee is not a member of the management committee) the treasurer of the management committee, and display the notice of meeting in a prominent place in the building.

(2AA) The notice of meeting shall specify –

(a) the date, time and place of the meeting; and

(b) the resolutions (if any) that are to be proposed at the meeting.

(2A) The notice of meeting may be given –

(a) by delivering it personally to the member of the management committee or (if the treasurer of the management committee is not a member of the management committee) the treasurer of the management committee;

(b) by sending it by post to the member or, if applicable, the treasurer, at his last known address; or

(c) by leaving it at the flat of the member or, if applicable, the treasurer or depositing it in the letter box for that flat.

9. The quorum at a meeting of the management committee shall be 50% of the members of the management committee (rounded up to the nearest whole number) or 3 such members, whichever is the greater.”

22.  Simply put, the BMO sets out two ways of convening a management committee meeting: first, it may be convened by the chairman (or the vice-chairman in the absence of the chairman); and second, it shall be convened by the secretary at the request of 2 members of the management committee.

23.  There is a difference between “to convene” a meeting and “to hold” a meeting. A meeting is convened by giving notice in accordance with the provision of paragraph 8 of Schedule 2. However, a meeting can only be held with a quorum (see paragraph 9 of Schedule 2).

24.  I find that:

(1) The chairman of a management committee is under a duty to convene a meeting at least once in every period of 3 months.

The chairman, whose statutory powers and duties are different from those of the secretary, may at any time convene a management committee meeting without having to wait for a member’s request. In other words, the chairman may convene a meeting at will. However, whether a meeting can be held smoothly depends on whether the necessary quorum is present — something beyond the control of the chairman. Of course, in deciding the date, time and place of the meeting, the chairman has to reasonably take into consideration the availability of other members. Still, he is under the duty to satisfy the statutory requirement by convening a meeting at least once in every period of 3 months.

Even if the members indicate that they are not available for a meeting, the chairman has to convene a meeting as required by the law and, in this instance, has to explain to the members the statutory requirement and try to persuade them to attend the meeting. If the chairman convenes a meeting as required by the BMO, but it cannot be held by reason of the refusal of individual members to attend, then the chairman is not liable for contravening the law and should be protected under section 29A of the BMO.

It is necessary for a management committee to meet once in every period of 3 months. According to section 29 of the BMO, the powers and duties conferred or imposed by the BMO on an owners’ incorporation shall be exercised and performed on behalf of the corporation by the management committee. This is understandable as the corporation normally meets only once a year (see paragraph 1 of Schedule 3). Simply by leaving all matters big and small to the corporation for decision in a meeting, the management committee is not performing the duties imposed on it by the aforesaid section 29; if the management committee entrusts all business to a manager and keeps itself out of it, its members may even be contravening the law (e.g. section 27(3) of the BMO).

(2) The secretary of a management committee is under a statutory duty to  convene a meeting upon, and only upon, the request of 2 members. If there is no such request, the secretary has no obligation to convene a management committee meeting.     

This also serves as a “safety measure” in that, if the chairman (and vice-chairman) fails to convene a meeting as required by the BMO, other members may request such a meeting.

(3) Having agreed to serve and been elected as such, members of a management committee are under a duty to participate, as far as reasonable, in the operation of the corporation, including attending management committee meetings. This explains why paragraph 4(2)(c) of Schedule 2 stipulates that any member of the committee shall cease to be a member automatically if he absents himself or herself from 3 or more consecutive meetings of the management committee without the consent of the management committee. The corporation is also empowered to remove and replace any incompetent member of the management committee (e.g. one who repeatedly and unreasonably refuses to attend meetings) by resolution at a general meeting (see section 14(2) of the BMO).

25.  In this action, Mr. Tam admits that no management committee meeting has been convened at all, and this is prima facie in contravention of paragraph 7 of Schedule 2. I need not at this stage make a final ruling on whether his explanations constitute an excuse for not convening any meeting, and everything will have to be dealt with at the trial proper (e.g. the issue of fact as to whether Ms Tzeng agreed not to have a management committee meeting). It is well known that the court should only strike out a claim in plain and obvious cases (see Hong Kong Civil Procedure 2012, para. 18/19/4). In my view, it is inappropriate to strike out Ms Tzeng’s application against Mr. Tam at this stage.     

26.  Ms Leung suggests in response that if a management committee has no right of action in law, Ms Tzeng should consider suing the owners’ incorporation. I do not accept this suggestion as the BMO does not empower the corporation to convene a management committee meeting.

27.  On the other hand, Ms Tzeng’s application against Mr. Chu (i.e. the secretary of the Management Committee) should in my view be struck out as it is common ground that there has never been a request for a meeting from 2 members; it is frivolous, vexatious and an abuse of legal process to pursue in the Tribunal an application with no factual basis and bound to fail (see Hong Kong Civil Procedure 2012, para. 18/19/8).   

28.  As mentioned before, the obligation to convene a management committee meeting lies with the chairman and the secretary, and the corporation has no power to convene such a meeting. Ms Tzeng’s application against the corporation should be struck out.

29.  At the hearing, Mr. Lo, Counsel for Ms Tzeng, tried to misconstrue the statement in the Notice of Application drafted by Ms Tzeng to encompass a complaint against the corporation for not convening an annual general meeting. I do not accept this interpretation, which fails to take into account the proper context. Ms Tzeng’s complaint has all along been the Respondents’ failure to convene a meeting in accordance with paragraphs 7 and 8(2) of Schedule 2. These two paragraphs both relate to a management committee meeting, not a general meeting of the corporation. The interpretation put forward by Mr. Lo of the words “the meeting” in the latter paragraph of the Notice of Application, namely that they mean the general meeting of the corporation, is wholly unjustified. If Ms Tzeng’s latest instruction was that she was complaining about the failure of the corporation to convene an annual general meeting, she and those advising her should have considered amending the Notice of Application to add a new cause of action or filed a new action on the basis of the relevant complaint. As Ms Tzeng has not applied to amend the Notice of Application, I shall not consider the claim in this respect.

30.  Finally, Ms Tzeng is asking the Tribunal to “make a ruling on the legality or otherwise of the corporation’s affairs over the past year or so”, but she has not set out in an amended Notice of Application the corporation’s affairs over which she is seeking the Tribunal’s ruling and the grounds upon which she relies. She has not applied to amend the Notice of Application with a view to clarifying this particular claim of hers; the claim as it stands is bereft of details and the other parties cannot possibly discern from the Notice of Application what the claim is about, and this will prejudice, embarrass or delay the fair trial of the action (see Hong Kong Civil Procedure 2012, para. 18/19/9).   

Conclusion

31.  For the above reasons, I strike out the application of Ms Tzeng (the Applicant) against Mr. Chu and the Incorporated Owners (the 2^nd and 3^rd Respondents) on the grounds that her application against them is frivolous and vexatious; will prejudice, embarrass or delay the fair trial of the action; and is an abuse of the process of the Tribunal. The 1^st Respondent’s striking-out application is dismissed.

32.  The parties have indicated that they are not seeking costs. I therefore make no order as to costs of this interlocutory application, the 2^nd Respondent’s costs in this action and the 3^rd Respondent’s costs in this action.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. Edmund Cham, Solicitor.