THE INCORPORATED OWNERS OF TSUEN WAN GARDEN v. PRIME LIGHT LTD

LDBM 83 - 85 OF 2003
(Consolidated)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 83-85 OF 2003

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J U D G M E N T

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1. By these proceedings the Applicant is claiming against the 3rd Respondent owner of shop premises in a building for contributions for costs of repairing and improvement work of the building of which the Applicant is the owners incorporation. The relevant resolution was passed at the owners meeting held on 25th November 2002. At the meeting three renovation plans of different scale were put to a vote. The voting form contained the three plans. Those who were present, in person or by proxy, were given only the option to choose one among the three plans. 438 shares voted for plan No.3 and 307 shares and 253 shares voted for plan No.2 and plan No.1 respectively. The resolution adopting plan No.3 for renovation was then declared passed. The total number of shares of those who were present in person or by proxy was 1024 and that of those who voted was 998.

2. Parties have made their positions clear. It has been agreed that the only issue before me is whether the resolution adopting plan No.3 has been duly passed by the requisite majority. If it has, then it is not in dispute that the 3rd Respondent is liable to pay its share of contributions as claimed by the Applicant and vice versa.

3. Mr. Yu submitted that a simple majority was required to carry the motion. 1024 shares were present and therefore more than 512 votes were required. Alternatively, counting only those who voted, namely 998 shares, a simple majority would require more than half, namely at least 450 shares. In either case, he submitted, the motion failed to carry.

4. The fourth schedule of the deed of mutual covenants of the building (the DMC) governs the procedure of the owners meetings. Clause k of the schedule provides that:

"Except as otherwise herein provided resolutions shall be passed by a simple majority vote of those present in person or by proxy at the meeting."

Mr. Yu solely relied on this clause in the DMC. However S8(5) of the Building Management Ordinance provided that the Third Schedule of the Ordinance shall apply to meetings and procedure of an owners incorporation. Mr. Wong was right in contending that once the owners were incorporated its meetings and procedure would be governed by the Third Schedule. Paragraph(3) of the third schedule provided that:

" ...all matters arising at a meeting...shall be decided by a majority of votes of the owners."

Mr. Wong submitted that only those who voted should be counted. I agree. This is in fact has no bearing on the case as the votes for plan No.3 were still less than half of those voted. The crux of the argument of Mr. Wong was that majority simply meant a bare numerical preponderance. As plan No. 3 had a highest number of votes the resolution was carried.

5. Mr. Wong cited the following authorities in support of his contention. Ernest V Loma Gold Mines Limited (1897( 1 Ch 1 was a case about the relationship between the statutory provisions of the then Company Act and the articles of association of the company in question. The issue was whether in a voting by show of hands when no poll was demanded the person who voted was counted only once or as many times as the number of absentees who had given him their proxy. The Court of Appeal ruled that it should be counted only once no matter how many absentees he represented by proxy. In Bushell V Faith (1970( A C 1099, on a show of hands a resolution to remove a director was passed and whereupon the director demanded a poll. As the director's shares carried an extra voting power, the resolution was defeated. The House of Lords held that the articles of association of the company which gave the director extra voting power was not rendered invalid by the provisions of the then Company Act. The remarks by Lord Upjohn that to the effect that an ordinary resolution could be passed in the first place by a bare majority on a show of hands was cited in particular by Mr. Wong.

6. It can be seen that neither of these two cases supported the contention that the majority could mean less than half of the votes of the persons voting or present. Incidentally the particular facts of the two cases indicated otherwise.

7. Mr. Wong also cited certain passages in text books in his argument. Firstly, under the title 'Majority' at page 98 of Shaw and Smith's the Law of Meetings (5th edition) the authors said,

" At common law, a majority of votes is constituted by a bare numerical preponderancy i.e. by there being at least one more vote on the one side than on the other."

This remarks by the authors Mr. Wong did read to me but the rest of the passage he did not. The whole of the passage should be looked at to see what the authors meant by numerical preponderancy. The whole passage is as follows:

" At common law,......at least one more vote than the other. In certain bodies, however, and in relation to particular matters, artificial majorities of varying complexity are required by statue or standing orders or other regulation. Thus in order to pass an extraordinary resolution of a company, the majority must consist in the votes of three-fourths of those present and entitled to vote and voting; while for the effective approval by creditors of a composition in bankruptcy, the majority must comprise three quarters in value of all the creditors who have proved their claims, as well as simple majority of the individual creditors."

Therefore it can be seen that the authors expressed no view that numerical preponderance could mean less than half of those entitled to vote and voting.

8. The second text book passage Mr. Wong cited was in Shackleton's On the Law and Practice of Meetings (eight edition) para 6-27:

" Majority is a term signifying the greater number. In legislative and deliberative assemblies, it is usual to decide questions by a majority of those present and voting. This is sometimes expressed as a "simple" majority, which means a motion is carried by the mere fact that more votes are cast for than against, as distinct from a "special" majority where the size of the majority is critical..."

Neither these remarks cited nor the examples given in the same heading support the contention by Mr. Wong that majority could mean half the votes of those entitled to vote and voting.

9. The ingenious argument of Mr. Wong runs like this. The resolution in question is not a two-way but three-way. Unlike the usual cases persons entitled to vote at the November meeting were not voting 'yes' or 'no' but asked to vote for the best plan. He made an analogy that it was like an election where three candidates stood for one seat and the one with the most votes won. The flaw of this argument is that an election depends on its rules. Even if this is the rule of the election and such elected candidate is surely and aptly described as one not elected by the majority. In the instant case, the ultimate question is whether those voting for Plan No. 3 outnumbered those who were against it. The poll results do not support such inference. Mr. Wong also argued that plan No. 1 is inevitable because it represented the minimal work that must be done under the order of the Building Authority. This would justify the 3 way vote. Be that as it may, it cannot be inferred that those who voted for the Plan No.2 or Plan No.1 would have voted for plan No.3. No one could have foreseen the poll results unless and until a consequential second poll was conducted. The second poll was necessary and its necessity should have been obvious to those who had the conduct of the meeting. That was not done and the resolution to adopt plan No.3 was not passed by the majority and was not valid within the meaning of the Building Management Ordinance. As a result the 3rd Respondent is not liable to pay the contributions for the work. The claim against the 3rd Respondent is therefore dismissed with costs to be taxed in High Court Scale if not agreed. The costs order nisi be made absolute in 6 weeks.