Asiabest Services Ltd. v. Harbour City Management Ltd. and Another

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Building Management Application No. BM 56 of 1997

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J U D G M E N T

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1. The Applicant is the owner of Rooms 508 and 509 at Tower 1, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong. The Applicant had been a member of the Owners' Committee since 1990, except for one term in 1991, and was an elected member of the Building Owners' Committee (the Committee) from 25th March 1996 for one year.

2. The first Respondent (R1) is the management company of the building known as Silvercord (the Building). It is also the secretary of the Committee.

3. The second Respondent (R2) is the owner of Room 1112, Tower 2, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong. R2 was elected as the Chairman of the Committee from 25th March 1996 for one year.

4. A Deed of Mutual Covenant (DMC) dated 1st December 1983, under Memorial No.2520408, was registered at the Lands Office.

5. There is no incorporation of owners of the Building under the Building Management Ordinance.

6. The application is made against R1 as the manager of the Building under Clause 10 (24) of the DMC.

7. One of the applicant's directors, Mr. Tong Chan (AW1), is also the sole proprietor of the firm Messrs. Tong Chan & Co. The firm was appointed as the legal advisor to the Committee on 1st September 1993, during a Committee meeting.

8. The owners of the Building held an Extraordinary General Meeting on 5thJuly 1996. During the meeting, two resolutions were passed by a majority of the owners, voting by poll.

9. The first resolution was that the owners were:

" To appoint solicitors at the expense of Silvercord Management Fund to clarify the questionable conflict of interest of Mr. Tong Chan, the former legal advisor of the building."(1st Resolution)

10. The second resolution was that:

" After the further report by the Chairman of Owners' Committee on the comments made by Mr. Tong Chan of Tong Chan & Company, and Ms. Mavis Wong of Aisabest Services Limited on the Chairman's recollection that "Mr. Tong Chan and the then Owners' Committee had in 1993 opined that Deacons was slow and expensive" in handling the legal proceedings taken against the owners of Suites 801-6, Tower 1 for its encroachment upon common areas, to appoint solicitors to pursue the matter at the expense of Silvercord Management Fund." (2nd Resolution)

11. On 21st November 1996, the majority of the members in a Committee meeting resolved to appoint Newco Company to erect a shopping directory counter in the common area on the 1st Floor of the Building, at the expense of the management fund. This is the third resolution (3rd Resolution)

12. On 18th July 1996, the majority of the members in a Committee meeting resolved that as from 18th July 1997, all minutes of meetings should be in the Chinese language only. This is the 4th resolution (4th Resolution)

13. On or about 9th March 1997, Ms May Tam, Estate Manager of R1 (RW2), in pursuance to her earlier offer, assisted another director of the Applicant's, Ms Mavis Wong (RW3), with minutes of meeting held on various dates in 1996, all written in Chinese. On 10th March 1997, during a Committee meeting, Mr. Leung Kam Chi, Oliver, of R2, together with the representatives of two other Committee members, Ms Linda Yeung of the Chinese Arts and Crafts (HK) Ltd. (CAC), and Ms Chung of Silvercord Ltd. (SL), prohibited Ms Tam from so doing in future (the Prohibition).

The Applicant sought as against R1: -

1. A declaration that the 1st Resolution is ultra vires and of no effect and ought to be set aside.

2. An injunction to restrain R1 from acting in pursuance of the 1st Resolution.

3. An order that R1 should indemnify the Building management fund for any loss or damage suffered in respect of the 1st Resolution.

4. A declaration that the 2nd Resolution is ultra vires and of no effect and ought to be set aside.

5.An injunction to restrain R1 from acting in pursuance of the 2nd Resolution.

6. An order that R1 should indemnify the management fund for any loss or damage suffered in respect of the 2nd Resolution.

7. A declaration that the 3rd Resolution is ultra vires and of no effect and ought to be set aside.

8. An injunction to restrain R1 from acting in pursuance of the 3rd Resolution.

9. An order that R1 should indemnify the management fund for any loss or damage suffered in respect of the 3rd Resolution.

10. A declaration that the 4th Resolution is ultra vires and of no effect and ought to be set aside.

11. An injunction to restrain R1 from acting in pursuance of the 4th Resolution.

The Applicant sought as against R2: -

12. A declaration that the Prohibition is ultra vires and of no effect and ought to be set aside.

14. It was not the Applicant's case that the Tribunal should adjudicate on the point on conflict of interest. The accuracy of the recollection was not in issue. The merits of the Resolutions themselves were not to be inquired into, but whether the use of the management Fund was proper and warranted.

The Applicant's first witness

15. The Applicant's first witness was Mr. Tong Chan (AW1). His evidence was that since August 1990, he had been operating his solicitors' firm at the Applicant's units in the Building. Around the same time, AW1 and the other director of the Applicant's, Ms Wong (AW3), became involved in the management matters of the Building.

16. There was a dispute, over the removal of the water cascade in the foyer of the Building. The dispute was between the developer and a majority owner, Silvercord Limited (SL), with 4160 (30.55%) of the shares, and another major owner, the Chinese Arts and Crafts (HK) Ltd. (CAC), with 2249 (16.52%) of the shares, on the one hand, and others owners. AW1 was asked to support the other owners, and so made his interest in the Applicant known in general terms firstly to Mr. Fung King Sun (AW2), of Manetta & Co. Ltd. (Manetta). The Applicant and Manetta were elected to the Committee in 1990. It was AW1's evidence that he attended various meetings, both formal and informal, with R1 and other owners, on management matters of the Building. He introduced himself as one of the owners in the Building, and was introduced as such by Mr. Fung. His evidence was that through various correspondence and dealings with R1, SL, CAC and owners, his connections with the Applicant was made known. The other owners also knew the connection of his firm with the Applicant.

17. AW1 referred to an authorization submitted to R1 by the Applicant on 15th August 1990. The authorization named AW1, as the Applicant's director, to vote on the Applicant's behalf, at a meeting of owners of the Building, on 15th August 1990.

18. AW1's signature appeared on the Applicant's behalf in a letter sent to R1 on 12 September 1990, protesting about the procedure at the owners meeting on 15th August 1990.

19. On 15th December 1990, the Applicant acquired Room 508 at the Building from CAC. CAC sent a notice on the assignment to R1, with a copy to the Applicant. The letter was sent to the Applicant, with the name of Chan Tong, solicitor, on top of the Applicant's name. The signatory of the letter, Mr. L. H. Yim, was also the representative of CAC, the Chairman of the Committee in 1991.

20. In various correspondences with R1, AW1 was referred by the Applicant as "our Mr. Chan".

21. The minutes of a special meeting of the owners of the Building on 31st May 1991 described AW1 as "an Owner Mr. Tong Chan".

22. On 26th February 1993, the names of AW1 & 3 were given to R1 as Authorized Representatives of Tong Chan & Co. at Suite 509 Tower 1 of the Building. The notice of the Annual General Meeting on 24th March 1993 was sent to the Applicant "c/o Tong Chan & Company" at 508-9 Tower 1 of the Building, by K.T. Lau, R1's Estate Manager.

23. AW1 attended a Committee meeting on 23rd July 1993. He was on record in the minutes of meeting as "Legal Advisor by invitation" with the Applicant listed in the column for "Company". He gave his opinion on the estimates of costs submitted by three firms of solicitors, which was to replace the previous legal advisor on the Peninsula Knitters' case. The minutes of the meeting was circulated to all member s of the Owners' Committee.

24. In a Committee meeting on 1st September 1993, AW1's firm was appointed as the legal advisor to the Committee and also as the representative in the Peninsula Knitters' case. Mr. Leung Kam Chi, Oliver, (Mr. Leung) of R2 was not at the meeting. The minutes of the meeting was sent to all members of the Owners' Committee. (The following details were not in the minutes of the meeting. AW1 and AW3 left the meeting while this was voted on. AW1 informed the meeting of his interest in the Applicant, and his position as a shareholder and director. R1' s Mr. K.T. Lau informed the meeting AW1 was a director and shareholder of the Applicant, an owner in the Building.)

25. AW1 accepted the appointment, on the condition that if there should be conflict of interest between the Building management matters and his firm or associated companies, his firm would resign as the legal advisor. He and AW3 had always withdrawn from the meeting on similar occasions when the re-appointment of the legal advisor was dealt with.

26. There had been social interchanges before and after the appointment. AW1's position in the Applicant's had been revealed to the Committee and R1.

27. R2 first became a member of the Owners' Committee on 25th March 1994, when an Annual General meeting was held. In December 1994, AW1, AW3, and Mr. Leung of R2 met socially while in Beijing.

28. AW1's firm was re-appointed as the legal advisor to the Committee until May 1996, when the firm resigned as legal advisor to the Committee and ceased to act for R1 in the Peninsula Knitters' case. AW1 decided on the resignation, as his firm's business was getting busier, and he was aware of the attitude of the Chairman R2's representative, Mr. Oliver Leung Kam Chi (RW3). On R1's request, AW1 recommended that, to save costs, Deacons should be re-appointed to act for the owners in that case.

29. R1 sent a letter to the Applicant dated 10th May 1996 (the Letter). It was copied to all the Committee members. The Letter recorded AW1's suggestion on the re-appointment, and the decision of the Chairman of the Committee (R2, represented by RW3) to accept the suggestion after discussion with the subcommittee. The Letter contained the following comment:

"...the Chairman recalled that Mr. Tong Chan and the then Owners' Committee had in 1993 opined that Deacons was slow and expensive in handling the case..."

30. Neither R2 nor RW3 was a Committee member in 1993.

31. As AW1 had not made any such comment, he wrote to RW3 on 17th May 1996. He sought clarification from RW3 as to whether RW3 had made the comment, and for it to be withdrawn with an apology, if RW3 had done so. After further exchange of correspondence, RW3 clarified in a letter dated 10th June 1996, that he did not know and had not said whether AW1 had in fact personally commented on Deacons. His recollection was that some members of the then Committee had done so. The correspondence had all been copied to the members of the Committee. R1 sent a letter to RW3 on 11th June 1996, copied to all Committee members, stating that RW3 had confirmed and agreed to the contents of the Letter dated 10th May 1996, before it was sent out. It was AW1's belief that, since then, RW3 bore a grudge against AW1, AW3 and AW2.

32. AW3 wrote to RW3 on 24th May 1996, referring to AW1 being her partner for over 20 years. On 11th June 1996, SL wrote to R2 as the Chairman, expressing surprise that AW1 was an owner in the Building. While SL believed that AW1's professional ethics and capacity, as the legal advisor, had not been affected by his interest, it was considered that this fact should have been disclosed at the outset. SL suggested that an Extraordinary General Meeting be held to let AW1 give an account of his work as the legal advisor, and for the question on conflict of interest to be clarified and resolved. The meeting was also to resolve that any one providing professional service to the Building should disclose his interest in the Building. That particular resolution was not passed.

The 1st and 2nd Resolutions

33. After further exchange of correspondence among the Applicant, R1, R2 and other owners, an extraordinary general meeting of all owners was held on 5th July 1996. The 1st and 2nd Resolutions were tabled. The resolutions were passed despite the Applicant's and some owners' protest.

34. There were 7383 shares in favour of the 1st Resolution. SL and CAC, with a total of 6409 shares, had voted for the resolution. There were 1459 shares against the motion, and 965 shares abstaining.

35. There were 6929 shares in favour of the 2nd Resolution. SL and CAC both voted for the resolution. There were 1599 shares against the Resolution, and 1279 shares abstaining.

36. AW1 was not challenging the voting procedure, as far as the validity of the votes was concerned.

37. AW1 was not contending that the owners had no right to inquire into whether there had been situations where AW1's advice would be against the intentions of the Applicant. He agreed that the owners would have the right, and that on the face of it, the 1st Resolution was an exercise of that right.

38. It was not in dispute that the Applicant was among the owners calling for a Committee meeting to be held on 28th May 1996, on the alleged comments on Deacons by the then Committee of 1993. It was then considered as a matter relating to the Building. RW3 of R2, AW1, the then Committee members and manager of 1993, would all have been possible defendants, had Deacons decided to take action for defamation.

39. It was alleged that the majority owners (SL & CAC), R1 and R2 decided to call an extraordinary general meeting, where the voting would be in accordance with shares, in order to avoid a defeat at the Committee meeting, where voting would be by show of hands. This was said to be oppressive conduct and a misuse of the powers of a Chairman and the majority owners. While AW1 & 3 were allowed to address the meeting, they were often interrupted.

40. The passing of the resolutions were also said to have exceeded the powers of the owners, R1 and R2 under the DMC, the Building Management Ordinance and/or the common law.

41. AW1 considered that the bad faith of these parties was further borne out by their subsequent acts. RW3 of R2 wrote to the owners about part of the management funds being used to pay legal fees to the legal advisor who had personal interest in the Building. R1 made a complaint to the Law Society on this matter. Because of the conflicting evidence between AW1 and the complainant, as to whether the Owners' Committee had knowledge of AW1's ownership of the Building and whether AW1 had made adverse remarks on Deacons, the Law Society did not take the matter further.

The Applicant's second witness

42. The Applicant's second witness (AW2) was Mr. Fung King Sun a shareholder and director of Manetta & Company Ltd. (Manetta) He became acquainted with AW1 & 3 in 1990, when he took an interest in the management matters of the Building. He went to visit AW1 at the latter's office to rally support over the dispute on the removal of the water cascade. Both AW1 & 3 informed AW2 that they were owners in the Building. AW1 begun to provide free legal advice to minority owners on management matters. AW2 appointed AW1 to act as Manetta's representative in the Committee meetings on several occasions. As AW1 & 3 helped other owners in drafting English letters to R1 over the cascade and other management matters, the other owners came to know that AW1 & 3 were owners of their office units. AW1 had attended meetings as an owner and representative of other owners to discuss management matters with R1. It was the evidence of AW2 that R1 must had been aware of AW1's capacity as an owner in the Building.

43. Because of the dispute over the cascade, relationship between R1, SL, CAC on the one hand, and AW1, 2 & 3 on the other, deteriorated. In 1991, Manetta and the Applicant were removed from the Committee. In 1993, Manetta and the Applicant were again elected to the Committee.

44. The Peninsula Knitters' case came into being. It involved the encroachment of common areas by an owner. The solicitors for R1 were Deacons. The Committee suggested to R1 to appoint new solicitors to replace the existing one, since there was not much progress with the action.

45. R1 accepted the suggestion, and three firms were asked to send in their estimates of costs. AW1 was asked to and gave his opinion, recommending one of the firms.

46. AW2 and some other Committee members considered that AW1's firm should be appointed, as AW1 was familiar with the situation, and his firm was in the Building. The proposal was passed at a Committee meeting on 1st September 1993 to appoint AW1's firm as the legal advisor to handle the Peninsula Knitters' case. The annual general meeting of 1993 appointed AW1's firm as the legal advisor to the Committee and the owners. During the discussion and voting on the appointments, for that year and on all similar occasions later, AW1 & 3 left the meeting. AW1 confirmed to the meeting his capacity as an owner, and explained about conflict of interest. It was a condition of the appointment that should there be conflict of interest, AW1's firm would resign as the legal advisor.

47. AW2's evidence was that apart from formal and informal meetings on management matters, there had also been social interchanges among the Committee members and R1. The Committee members and R1 knew each other. He refuted the allegation that R1 and R2 only knew of AW1's firm as an occupant of the same office as the Applicant. The Respondents should know AW1 as the proprietor of his law firm, and his connection with the Applicant, an owner in the Building.

48. During the annual general meeting in 1994, SL, CAC, Manetta and the Applicant were re-appointed as Committee members. R2 was also appointed. AW2 invited R2 to join the Committee.

49. In 1994,1995 and 1996, AW1's firm were re-appointed as legal advisor, and the representative on the Peninsula Knitters' case. Questions on possible conflict of interest were raised in 1995 by SL and in 1996 by RW3 of R2, but without specific incidence in support.

50. R2 was appointed as the Chairman, and the Applicant as the vice-chairman, at the annual general meeting on 25th March 1996.

51. AW2 was aware of the Letter dated 10th May 1996. As Manetta was also a Committee member in 1993, and AW2 had made no such comment on Deacons, AW2 wrote to RW3 in protest. RW3 refused to clarify the matter or to apologize. RW3 demanded AW2's apology, which was in turn refused. Neither R2 nor RW3 was a Committee member in 1993.

52. AW2 agreed with the evidence of AW1 &3, on matters relating to the Building matters and AW2 himself.

The Applicant's third witness

53. The Applicant's third witness was Ms Wong Mavis Moo Tzeng, a director and shareholder of the Applicant's. (AW3)

54. AW3's evidence described the general layout of the Building, with two office towers, Tower 1 and 2, and a connecting Podium from the Ground to 4th Floor. There is also a lower Ground floor and a basement floor. SL and CAC together owned all the shop units of the Podium floors.

Directories and the 3rd Resolution

55. On each floor of the office towers, there is an office directory of that particular floor on the wall at the lift lobby. There is a large office directory, for all owners and tenants, on the wall near to the entrance of the lift lobby to each of the office towers, on the first floor of the Podium.

56. There were originally two large shopping directories on the first floor of the Podium, one on each side. These were removed between 1992 and 1995 when SL renovated its shops.

57. SL later erected a shop tenants' directory on the wall of the shopping arcade leading to Hoi Phong Road. Red stickers were put up on the walls and columns in the Podium common areas, together with shop directory stands. SL and CAC were responsible for the maintenance of these items. The Committee had not approved these directories and stands.

58. On 30th April 1996, the Committee meeting considered that these directories and stands were unsightly, and suggested that they should be removed. SL was to arrange for the design of an information counter. It was understood that SL and CAC would bear the cost of erecting the counter. The meeting had not approved the erection of the counter in common areas.

59. At two subsequent Committee meetings, discussions were held on the replacement of all the existing office directories in the office towers, and the installation of a new shopping directory information counter at the bridge on the first floor of the Podium. There was no approval to use the Management Fund for the information counter. AW1's objection was not put on records at the meeting on 18th July 1996. AW3 was not given the opportunity to correct the draft minutes before they were signed by RW3 and distributed.

60. The members only approved the use of aluminum to replace the existing office directories in the meeting on 12th September 1996.

61. In the Committee meeting on 21st November 1996, RW3 and some Committee members insisted that resolutions approving the use of Management Funds for the provision of the shopping information counter had been passed at the previous committee meeting, and the choice of material made. The meeting was to choose the contractor for the work. The Applicant abstained from voting.

62. There had been no such resolution, and the use of Management Funds for this item of work costing $110,000 should not be allowed.

Minutes of meeting and the 4th Resolution

63. From 1990 to early July 1996, all minutes of meeting were in English. AW3 believed that it was implied in the DMC that all members who took part in the Committee meetings should be fully aware of the matters discussed, resolved and recorded in the minutes. There were owners who did not understand Chinese on the Committee, and the Committee was aware of this. AW3 does not read Chinese. R1 had represented itself as being able to prepare minutes in both Chinese and English.

64. AW3, in her capacity as a representative of the Applicant, which was the vice-chairman of the Committee, had always been concerned with the accuracy of the minutes prepared by R1. The proposal to use both Chinese and English for the minutes was voted down.

65. It was AW3's belief that the 4th Resolution, to use only Chinese for recording the minutes, was to curtail her involvement in the preparation of the minutes. It was out of spite towards AW3, the Applicant and their supporters, in breach of the implied term in the DMC, served no useful purpose in the Building's management, and an attempt to frustrate non-Chinese owners in the understanding of the minutes. The 4th Resolution was an abuse of power under the DMC, and was illegal. R2 and its supporters had exceeded the powers under the DMC.

66. R1 had since 1997 begun to issue notices, circulars, minutes of meetings etc. in both Chinese and English. AW3 considered this to be an indication of the bad faith of R2, SL, CAC and their supporters.

The Prohibition

67. On 20th December 1996, questions were raised during a Committee meeting on the provision of bilingual minutes, R1 suggested that non-Chinese owners could engage their own translators, or R1 could give individual explanations. RW2 Ms May Tam offered to attend AW3 at her office to assist her in understanding the Chinese minutes. As AW3 had no objection to Chinese minutes if she was given an English translation, she accepted RW2's offer. RW2 did provide the necessary assistance.

68. During a Committee meeting on 10th March 1997, RW3 of R2, Ms Yeung of CAC and Ms Chung of SL reprimanded RW2 for her assistance to AW3. RW2 was prohibited from rendering any further assistance to AW3.

69. It was the Applicant's case that the Prohibition was ultra vires and should be set aside.

70. AW3 agreed with the evidence of AW1 & 2, on matters relating to the Building matters and AW3 herself.

The Respondents' first witness

71. The Respondents' first witness was Ms Yu Sim Kuen Katie, the Product Manager of Tom Lee Music Company Limited. (RW1)

72. Her evidence was that from 1992 to 1993, the Tom Lee Music Company Limited was a member of the Owners' Committee in the Building. She was the representative. She could remember that comments were made about the Peninsula Knitters' case and the handling of the case by the then solicitors. She could not recall who had made the comments, but did confirm to Mr. Leung that such comments had been made. RW1 was not sure when those comments were made, whether that was before, during or after a Committee meeting.

73. RW1 agreed in court that she could not recall if AW1 had disclosed his interest in the Applicant at the Owners' Committee meetings. She did not pay particular attention to the minutes of 1993 Committee meetings as to the attendance.

The Respondents' second witness

74. The Respondents' second witness was Ms. Tam Wai Mui (May Tam) R1's Tenant Services Administration Manager. (RW2) She has been in the same position since 4th November 1996.

75. RW2 had attended the Building's Owners' Committee meetings since 21st November 1996. She had no personal knowledge of matters occurring before she joined R1.

76. On 9th March 1997, RW2 attended AW3 at the latter's office to explain minutes written in Chinese. On 10th March 1997, RW2 reported this to the Owners' Committee. RW3 of R2 and another member queried the use of R1's resources to provide such service to a particular owner's representative. They considered that AW3 should arrange for her own translation service, at her own expenses. As RW2 found her own service to be ineffective, she informed the meeting that she would no longer be providing such service to AW3. RW2 denied that there had been any stern prohibition against her assisting AW3. RW2's evidence was that R1 was responsible for providing service to the Building, not to the Owners' Committee. As far as daily management matters were concerned, R1 would consult the Owners' committee, but did not necessarily accept their comments.

77. R1 considered the setting up of an information counter at the shopping arcade, and the replacement of the office directories, to be for the benefit of all owners. These were decisions taken before RW2 joined R1, and of which she had no personal knowledge. RW2 decided, on behalf of R1, to use the Building's management funds to cover the costs. She was of the opinion that, prior to the meeting of 21st November, 1996, the Owners' Committee must have resolved on the erection of the information counter, as the Committee members decided on the price for the project during the 21st November meeting.

78. The budget for the year 1997 was passed at a meeting on 20th December 1996. That budget included the budget for the information counter costs, which was to be paid for out of management funds.

79. As for the complaint to the Law Society, RW2's predecessor in title, Mr. K. T. Lau, instigated it. Since he had left R1, RW2 took up the matter, and responded to the Law Society's queries. There was no referral to AW1. It was RW2's understanding that based on the resolution of the Emergency General Meeting, (the 1st Resolution); R1 was to follow up the matter. R1 obtained legal advice from its solicitors, and lodged the complaint to the Law Society, with a view to obtaining its adjudication on whether there was conflict of interest. As far as RW2 was aware, there had been no report made on the legal advice obtained or relevant documents supplied, to RW3 of R2, SL & CAC or the Owners' Committee. She did not refer further correspondence, either from AW1, or that copied to R1 from the Law Society, to R2. SL & CAC.

The Respondents' third witness

80. The Respondents' third witness was Mr. Leung Kam Chi, Oliver, R2's director. (RW3) From 1994 to 1996, R2 was a member of the Owners' Committee in the Building. R2 was elected as the Chairman of the Owners' Committee in 1996. RW3 represented R2 in the Committee.

81. It was RW3's evidence that even though he had instructed AW1 to act for him, he had never known of AW1's interest in the Applicant, until AW3's letter of 24th May 1996. The letter referred to AW1 as AW3's partner for 20 years. A company search revealed AW1 to be a director and shareholder of the Applicant's.

82. He had been present in at least one Committee meeting in which AW1 was appointed as the legal advisor. His evidence was that AW1 had clarified that if conflict of interest should arise, AW1 would withdraw. AW1 & 3 had left the meeting while the appointment was discussed, to avoid conflict of interest. RW3's impression was that AW1 was not an owner.

83. In May 1996, AW1's firm resigned as the solicitors to R1 on the Peninsula Knitters case, and from the position of legal advisor to the Committee.

84. RW3 spoke to Mr. K. T. Lau of R1 on the telephone before the Letter of 10th May 1996 was sent out by R1. He informed Mr. Lau that he had heard from a third party, whose identity he could no longer remember, about the reason for the change of solicitors previously. RW3 was not present when that was discussed. He verified the matter with RW1 and Mr. Lee Wai Bun of CAC. Nothing had been mentioned by either of them as to whether AW1 had made the comments on the solicitors. RW3 was not certain if AW1 had made such comments. In repeating that piece of information, RW3 did not consider that there was anything personal or pertaining to conflict of interest. As a result of the Letter, an Owners' Committee meeting was held on 28th May 1996. RW3 gave his explanation to the meeting. The meeting did not produce any satisfactory solution. It was later decided that an Extraordinary General Meeting should be held to settle the matter.

85. On 5th July 1997, an Extraordinary General Meeting of the owners was held, in which the 1st and 2nd Resolutions were passed. Before the meeting was called, RW3 talked over the matter with representatives of SL, CAC, Yue Shang Development Co. Ltd., and R1. RW3 then referred the drafting of the resolution over to Mr. K. T. Lau of R1. Mr. Lau of R1 and RW3 drafted the Resolutions. The meeting was called at the request of SL. Two committee members' representatives had also informed RW3, that they felt pressurized, if they should express a different view, it could subject them to receiving letters of complaint from solicitors. They would resign unless the matter was settled. RW3 called the meeting to satisfy the committee members' request, and to discharge his duty as the Chairman. RW3 had not listened to the opinion of some owners, who wrote to him in objection to the use of management funds under the proposed Resolutions. Once the Resolutions were passed, RW3 considered that the matter had been handed over to R1 to deal with. As far as RW3 was concerned, the matter had been clarified to be not a personal one, and there would be no further development. RW3 did not expect any solicitors appointed pursuant to the Resolutions to act for him. RW3 had not been consulted nor informed before R1 laid a complaint to the Law Society against AW1.

86. In relation to the minutes of meetings being in Chinese only, RW3 was initially in favour of bilingual minutes. However, he acceded to the views of some committee members, who considered that there were already too much disagreement over the previous minutes, recorded in one language only. If the minutes were to be bilingual, the time required for the meeting to come to an agreement on the minutes would be too long.

87. RW3 insisted that, since the matter had been referred to R1, some resolutions must have been passed in general, in relation to the setting up of a shop directory or information counter, in the meeting on 12th September 1996. RW3 agreed that this had not been put in the minutes of that meeting, and conceded that it could be his negligence. RW3 was of the opinion that R1, as the manager, should have the power to deal with such minor matters, without the need of resolutions by the Owners' Committee. His understanding was that, for such minor matters, if no one raised any objection, it would be considered as being passed by voting.

88. In respect of the Prohibition to RW2 against her assisting AW3 with the minutes in Chinese, RW3 denied that he had ever issued such a Prohibition. He only suggested that since other members provided their own assistance on the minutes, RW2 did not have to undertake such extra service in the future.

89. RW3 insisted that he had nothing personal against AW1, AW3 or the Applicant.

The Applicant's submission

90. The manager, R1, was not being sued in its own capacity, but as the representative of the owners of the Building. There is no Incorporated Owners, and the application was brought under Clause 10 (24) of the DMC.

91. The Applicant contended that the 1st and 2nd Resolutions were in breach of the DMC, not being matters concerning or relating to the Building. They arose out of the personal disputes between AW1 and R2. It was outside the powers of the owners, unjustified, for the wrong reason or with ulterior motive. The management funds should not be expended to engage solicitors under the 1st and 2nd Resolutions.

92. The 3rd Resolution was in breach of the DMC and BMO. There had never been any resolution to allow the use of management funds for the setting up of the shop directory, so the resolution to engage a contractor for the job could not be a valid one. The setting up of the shopping directory counter in the common area on the 1st floor of the Building was also invalid.

93. The 4th Resolution was in breach of the DMC.

94. These were all ultra vires and without merits.

95. The Applicant agreed that there was no definition of ultra vires in the DMC and BMO, and no direct legal authority in building management cases. Analogy was drawn from Company and Administrative laws. Because of the extent of powers in building management, those exercising such powers should be subject to control.

96. The powers of the Owners' Committee of the Building are strictly limited to the management of the Building, under the provisions of the BMO and Clause 21 ( h ) of the DMC. The powers of the manager are strictly limited to the management of the Building, under the DMC.

97. While owners of the Building could meet " to discuss and decide matters concerning the Building", that must be confined to matters concerning the management of the building. (Clause 20 (c) & (o) of the DMC)

98. If the Resolutions and the Prohibition were not in connection with the management of the Building, were outside the powers of the owners' meeting or Owners' Committee, or passed without justification, for the wrong reason and improper motives, then they would be ultra vires.

99. While the Tribunal was not being asked to decide whether there was any conflict of interest, or whether there was in fact such comments made about the previous legal advisor, it was submitted that the motive and the conspiracy of the majority owners and the Respondents must be looked into.

The 1st Resolution

100. Though it was not part of the pleaded case, the Applicant contended that the 1st Resolution was a conspiracy among Mr. K. T. Lau of R1, RW3 of R2, SL, CAC and others.

101. The Applicant considered that there could be no conflict of interest at all, as AW1's connections with the Applicant and his firm had been made known to R1 as early as 1990. The minutes of special owners' meeting on 31st May 1991 recorded AW1 as an owner. At various meetings of the Owners' Committee, on 1st September 1993, 21st March 1995, and 29th June 1995, when the appointment of AW1's firm as the legal advisor was discussed, the question of conflict of interest was also raised. The other owners, including SL and CAC should be aware of the situation. Since there could be no doubt in the minds of the other owners as to the capacity of AW1, the 1st Resolution must be void. The Applicant relied on the fact that the owners, having appointed AW1's firm, re-appointed it for several terms, to say that the owners must have been satisfied that there was no conflict. Either that or they did not thank of it as material, and so waived it. There had never been any particular incidence of conflict. The 1st Resolution could not be a matter concerning the Building, being the result of the personal dispute between R2 and AW1. The owners had no power, proper reason or motive for passing it.

102. It was contended that RW3 orchestrated the 1st Resolution, with the assistance of R1, SL and CAC. It was a scheme to force AW1 to return the legal fees, which was earned as the legal advisor to the Building. RW3 was displeased by AW1's refusal to provide free legal advice to the Building, the 1st Resolution was his way of exacting his revenge. It was submitted that the Respondents' witnesses were not truthful when they denied knowing AW1's capacity.

103. The Applicant also relied on the events following the 1st Resolution to say that there was a conspiracy against AW1. R1 complained to the Law Society about the conflict of interest, but neither consult nor report it to the Owners' Committee. R1 had not wished to disclose its identity as the complainant. The chairman was not consulted prior to the complaint.

104. The 1st Resolution was submitted to be an abuse of the powers in the matter of the building management and use of funds of the Building. It was in reality, a way to settle personal disputes using Management Fund.

105. The 1st Resolution was therefore, an abuse of power, ultra vires, and contrary to clause 20 (c) & (o) of the DMC.

106. The 1st Resolution was unmeritorious.

107. AW1 had made sufficient disclosure of, and declared his interest. The firm had resigned from the position in May 1996. Management funds should not be wasted on a futile exercise.

108. There had never been any particular incidence of conflict.

109. There is nothing to prohibit AW1's firm from so acting in the Law Society's Code of Professional Conduct.

The 2nd Resolution

110. It was the Applicant's case that AW1 never made the comment. There had been no such comment recorded in the minutes of the Owners' Committee meetings in 1993. RW3 was not present at the Owners' Committee meetings in 1993. The correspondence between the Applicant and RW3 had not frustrated the management of the Building. That was not harassment of RW3, but AW1's means of protecting his own interest.

111. It would be necessary to decide whether there was in fact such a comment made. It would be also necessary to decide whether the 2nd Resolution was within Clauses 5, 10 (29) (a) & (b), and Clause 20 (c) & (o) of the DMC. If the dispute, between RW3 and AW1, over whether AW1 had made the comment was a personal one, then the resolution was ultra vires and not related to the management of the Building.

112. It was submitted that the 2nd Resolution was passed with an improper motive. It was an abuse of power, and was reasonable.

113. There was no record of AW1 making the comment, on any of the minutes of the Owners' Committee, between June and September 1993. On 11th June 1993, when AW1 was invited to comment on the estimate of legal costs from other solicitors' firm, he was present as a representative for Manatta. AW1 was not present as a representative for the Applicant; he was not there as the legal advisor. It was in that meeting that the Owners' Committee decided to replace the legal advisor. The minutes of the 1st September 1993 meeting showed that AW1 was representing the Applicant. RW3 was not present. AW1's firm was appointed to be the legal advisor of the Building. There was no discussion of the previous legal advisor's handling of the case against Peninsula Knitters.

114. The dispute was therefore the result of the alleged recollection of RW3. There was no document in support. R1 had refused to apply to the Lands Tribunal to set aside the 2nd Resolution. The Applicant and some owners considered that it was a personal dispute. RW3 was using Management Funds for settling his personal dispute with AW1.

115. It was submitted that AW1's evidence should be accepted. His oral evidence was consistent with the documentary evidence. Both AW2 and RW3 agreed that AW1's service to the Building was satisfactory. AW2 corroborated AW1's evidence. RW1 and RW3 were not credible witnesses. Both of them could not be sure if AW1 had made the comment.

116. It was submitted that RW3's evidence should not be accepted. He could not remember many things. He was evasive. He changed his evidence. His oral evidence was inconsistent with his statement. He admitted that his recollection was a personal view. RW3 alleged that his recollection was based on information given to him by other committee members. He had later asserted that he was present at some of the 1993 meetings, and heard the comment. RW3 was not able to supply any details as to how he came to be in possession of such information. He could not be sure if AW1 and other committee members had in fact made the comment.

117. RW1 admitted in court that her witness statement was not correct. She had no recollection of what had happened. RW3 approached RW1 in 1996, and led her to believe that AW1 had made the comment. RW1 was not certain that AW1 had made the comment.

118. There must be a finding that AW1 did not make the comment.

119. There was no evidence of the management of the Building being frustrated by the dispute over RW3's recollection. RW3 brought the situation into being by maintaining the correctness of his recollection, which was later admitted to be uncertain. AW1 was entitled to clarify the situation. That was a personal matter for which Management Funds should not be expended.

120. AW1's application was only concerned with the dispute between AW1 and RW3. There was no application for a decision on the dispute between RW3 and the Owners' Committee. Even if AW1's version were not accepted, this would still be a personal dispute between AW1 and RW3. It was not a management matter.

121. RW3 asserted that his recollection caused no damage to the owners. If that was true, Management Funds should not be spent on the dispute.

122. It was submitted that the 2nd Resolution was part of a conspiracy among K.T. Lau of R1, RW3, CAC & SL to exact the return of the legal fees paid to AW1, and a personal vendetta. K. T. Lau lied about obtaining information from AW2, who was not present at the meeting on 11th June 1993. Only the Applicant, AW1 and his firm were named in the 2nd Resolution, when the whole Committee should be involved. The intention was to bring in the name of AW1's firm, for future complaint to the Law Society. The Respondents had also confused the personal and official identities and capacities of the Committee members.

123. The complaint to the Law Society was surreptitious. RW3, who had not been telling the truth, left the matter to K. T. Lau and did not follow up on it. It was outside the scope of R1's powers as the manager to lodge a complaint to the Law Society. RW3 was uncertain if AW1 had made the comment. The Owners' Committee and the owners at the AGM had not been informed of this complaint. In filing the complaint, R1 had not made full and frank disclosure of all the facts and document. These should have been favourable to AW1.

124. There was no evidence that any investigation under 2nd the Resolution had been carried out. Without investigation, there can be no follow-up action. R1 informed AW1's firm that legal advice had been obtained, and the matter concluded. Such advice was never tabled before the Owners' Committee. There was no report made to the Committee, or the AGM. All these pointed to a conspiracy among R1, RW3, and the majority owners, SL & CAC.

125. It was the Applicant's case that, it was against this background of a conspiracy that the 2nd Resolution came into being at the EGM. There the voting was by poll, according to the undivided shares. In the Owners' Committee, the voting would have been by show of hand, with one vote to each member, regardless of their share in the Building. All the subsequent actions or inaction by RW2 & RW3 were the direct result of the conspiracy. It was part of the concerted action to damage AW1's character and professional career.

126. R1 had abused its powers as the manager. The 2nd Resolution was passed with improper motive and was not in connection with the management of the Building. The Respondents cannot rely on Clause 14 (b) of the DMC, as these were not permitted expenses relating to the management of the Building. Neither could the Respondents rely on Clauses 5, 10 (29) (a) & (b) of the DMC. The majority owners were oppressing AW1.

127. There was no merit to the 2nd Resolution.

The 3rd Resolution

128. The Owners' Committee was in breach of the DMC Clauses 11 (c), 13 (a) & 13 (c) in authorizing the use of Management Fund to erect a Shopping Directory counter for the tenants of SL and CAC.

129. The Owners' Committee was in breach of the DMC Clauses 3 (b) & 15 (d) in authorizing the use of common areas for the erection of the counter.

130. In 1992 SL removed existing shopping directories. Later, stickers were posted up in the common area as directories. When owners suggested that these be removed, it was their understanding that SL and CAC would pay for the information counter to be set up. Further discussion on the office directories and shops directories was on the same understanding. The Owners Committee had passed no resolution in the meeting on 12th September 1996 on the information counter. Various other meetings passed resolutions on office directories. There was no resolution to pay for the information counter out of Management Funds. There was no resolution to permit common areas to be used for the erection of the counter. The owners were misled into thinking there was a resolution on the shopping directories in the meeting on 21st November 1996. The counter was for the benefit of the owners and tenants of the shopping arcade only. It should not be paid out of Management Funds.

131. There had been no compliance of the requirement under Section 34I of the BMO. The occupation of the common area by the information counter was illegal.

132. Even had there been such a resolution, it would be against Clauses 3 (b) and 17 (d) of the DMC. SL, having removed the original directories, should reinstate them at its own expense.

133. The expansion of Management Funds for this purpose was contrary to Clauses 11 (c) & 13(c) of the DMC, which stated the funds should be for the management of the Building. It would also be contrary to Clause 18 (a) (iii) of the DMC, which state that the cost of a sign in the Building should be borne by the person requesting the same. It would be an abuse of power to use the Management Funds in such a way.

The 4th Resolution

134. The 4th Resolution was outside the scope of Clause 21(h) of the DMC. It discriminated against those who could not read Chinese. It restricted the use of language for minutes of meetings. There was no such restriction in any Deed or Ordinance.

135. Members in the Owners' Committee were entitled to know what had transpired at meetings and recorded in the minutes. Non-Chinese owners would find it difficult to understand the minutes.

136. It was not in dispute that there were owners who did not speak or read Chinese. AW3, as the representative of the Applicant, had been an active vice-chairman. She vetted the minutes of meetings with great care.

137. At the Owners' Committee meeting on 18th July 1996, there was a tie in the votes over the use of Chinese alone, or the use of both English and Chinese for recording the minutes of meetings. RW3 placed his casting vote in favour of the use of Chinese alone. This effectively prevented AW3 from understanding the minutes without assistance in the translation.

138. On 23rd May 1997, the Owners' Committee meeting resolved that, from May 1997, minutes would be recorded in both English and Chinese.

139. It was submitted that RW2 and RW3 had not been truthful when cross-examined on the reason for the decision and subsequent change. It was another facet of the conspiracy against AW1 and his supporters. There was no convincing reason for such a decision. The later change, to bilingual minutes, further proved the point. It was an attempt to circumvent the possible legal consequences of the Application.

140. The 4th Resolution was, therefore, part of the conspiracy against AW1 & 3. It was passed with improper motive, ultra vires and an abuse of power.

The Prohibition

141. The Prohibition arose out of the previous 4th Resolution, and the way minutes were to be kept henceforth. There had been complaints about the minutes being in Chinese only, from AW3 and other owners. RW2 offered to assist AW3 in understanding the Chinese minutes, AW3 took up the offer. RW3 issued a stern warning to RW2 when he knew of this at a subsequent Committee meeting. RW2 denied there was such a prohibition. It was submitted that her evidence should not be believed.

142. The Applicant submitted that the Prohibition was an unreasonable one, and ultra vires. It was issued with an improper motive, and was an abuse of power, discriminating against AW3.

143. The Applicant's protest in writing, and those of AW2 and other owners at a subsequent meeting were ignored. There was no record that R1 complained about the provision of the service to AW3.

144. It was further submitted that RW2's evidence on this point was not to be relied on. She denied that RW3 issued a stern warning to her, and alleged that she first came to know of the Prohibition on reading the present Application document.

145. RW3, in cross-examination, admitted that he did speak sternly to RW2. AW3 had complained of RW3's conduct and temper.

146. R2 was not in the position to interfere with R1's administrative work, of which the provision of translation assistance to an owner's representative was one. RW3, acting as the Chairman of the Owners' Committee, had no power to issue such a prohibition.

147. The Applicant submitted that 4 Resolutions and the Prohibition were ultra vires. R1 had abused its power as the manager, conspiring with R2 and the major owners against AW1and his supporters. R1 was being sued in its own capacity, since it refused to bring an action against the owners. R1 cannot rely on Clause 10 (15) of the DMC. R1 had actively conspired against AW1, and was biased and dishonest in its conduct of matters relating to AW1. R1 cannot rely on Clause 10 (29) (c) of the DMC. The Applicant submitted that R1 was not entitled to any indemnity, as it was specifically disallowed under S.34 of the BMO.

The Respondents' submission

148. The Applicant's case on the 1st to 4th Resolutions was only that they had been passed in breach of the DMC. By bringing the application, the Applicant was trying to enforce the DMC. The Applicant could not do so, as the Manager had been irrevocably appointed to enforce the DMC, under Clause 9(c). The owners could not enforce the DMC unless through the Manager. This covenant had not been discharged by the BMO, and was not nullified by S.45 of the BMO. Chau Mei Lee Fragrance v. Ng Yee Tim [1996] 4 HKC 46 was cited in support.

The 1st Resolution

149. There was no challenge to this resolution, or the other resolutions, on the basis that formalities in convening or passing the resolutions had not been complied with.

150. The Applicant asked for the 1st Resolution to be set aside, on the grounds that it was not a proper subject for resolution in a meeting of owners, under Clause 20 of the DMC, and that there were no merits in the subject matter. The subject matter must be the clarification of the questionable conflict of interest of AW1 as legal advisor. The Applicant's pleaded case was that the 1st Resolution was in breach of Clause 20 (c) & (o) of the DMC in that the subject matters of the 1st Resolution were not matters concerning or relating to the Building as stipulated in those clauses. Further or in the alternative, there was no merit in the subject matter of the 1st Resolution to warrant the use of Management Fund.

151. The Respondents said the Applicant's averment, that R1 and the other owners knew AW1 to be an owner, related only to the alternative case that there was no merit in the subject matter of the 1st Resolution.

152. The Applicant sought a declaration that the 1st Resolution was ultra vires, void and ought to be set aside, an injunction to prevent R1 from acting according to the 1st Resolution, and for R1 to indemnify the Management Fund for expenses incurred under the 1st Resolution.

Motive

153. It was submitted that the Applicant had never pleaded that there was a conspiracy among RW3 of R2, SL & CAC. It was only advanced during the trial. It had never been made out in the evidence. The motive of the individual owners in voting for the resolution was irrelevant. AW1 could not say what was in the minds of the other owners when they were voting, and did not consider the 1st Resolution to be directed at AW1 with ulterior motive.

Conflict of interest

154. The Tribunal accepted that, there would be no investigation into whether there was conflict of interest. The Applicant's alternative case based on merits could not be advanced any further. The only point would be whether the clarification sought fell within business of the Owners' Meeting.

R1's position

155. It was R1's position that the subject matter of the 1st Resolution concerned and related to the Building under the DMC.

Whether the clarification sought fell within business of the Owners' Meeting

156. Under Clause 20(c) & (o) of the DMC, the owners might meet to "discuss and decide matters relating to the Building." There was no restriction to matters relating to the management of the Building, so the owners could discuss and decide matters arising out of the management or incidental to the management, and matters relating to the owners' interest.

Wording of the 1st Resolution

157. By including the word "questionable" in the resolution, the owners left open the question of whether there was conflict of interest. The owners' intention was clearly that, since they could not determine whether there was any conflict, they would let solicitors do the investigation.

Nature of the subject matter

158. The shareholder of an owner company, with a unit in the office towers of the Building, would have an interest in the outcome on matters discussed in the Owners' meetings. The legal advisor to the Building should act for the interests of all owners. The legal advice may not be in the interest of office unit owners. There was evidence of discord between the office owners and shop owners. The question of conflict of interest came into being when the appointment was made.

159. Non-disclosure would be a breach of fiduciary duty to the Owners. Even after disclosure, AW1 put himself in a difficult position, raising questions as to whether there had been situations involving actual conflict, and whether there were breaches of fiduciary duty.

160. The passing of the 1st Resolution did not mean that action would be taken against AW1. It would depend on the advice received, with the Manager acting on behalf of all the owners. The 1st Resolution was to engage solicitors to clarify the matter on conflict of interest. The subject matter concerned the management of the Building. It arose out of the appointment of the legal advisor to the Owners' Committee. The Owners' Committee represented the owners. If there were questions arising out of the appointment, the owners were entitled to have the matter investigated.

161. AW1's contention was that he considered there had never been any conflict of interest, so the resolution was not necessary. But even AW1 accepted that the owners had the right to inquire if they were not sure. AW1 had accepted that the 1st Resolution was an exercise of the owners' right to do so.

Background

162. R1 contented that the background was irrelevant. The evidence showed that the 1st Resolution was proper and justified in the circumstances of the case.

163. AW1 first appeared as a representative of Manatta, on 11th June 1993. In this Owners' Committee meeting, the Peninsula Knitters' case was discussed. AW3 chaired the meeting. The Owners' Committee decided to change solicitors. AW1 was asked to advise in the next meeting.

164. In the next meeting, on 23rd July 1993, AW1 advised on the bills of costs submitted. In neither of these meetings was AW1 referred to as related to the Applicant. There was no discussion on the appointment of AW1's firm as the legal advisor. Another firm was to be appointed. There was no need for AW1 to disclose his interest in the Applicant. AW1 was not described as invited as "owner by invitation."

165. The minutes of 1st September 1993 did not record AW1 & 3 leaving the meeting when the appointment was discussed. AW1 was described as "Legal Advisor by invitation" on the minutes. He had not been so described on the minutes of the previous meeting.

166. Given AW3's attention to the draft minutes, that there was no record of AW1 & 3 leaving the meeting, and AW1's disclosure of interest, on the minutes, would have aroused her comments. There was none.

167. There was no record of AW1 & 3 leaving the meeting on 26th April 1994, when the appointment was discussed. The Applicant did not oppose the draft minutes.

168. During the meeting on 29th June 1995, AW1 & 3 did leave the meeting to avoid conflict of interest. K. T. Lau of R1 explained about the conflict of interest, but on the basis that AW1's firm was the occupant of the Applicant's premises. AW1 wished to put on record that he had informed the meeting that "should any incidences of conflict of interest arise between his position as legal advisor and the management affairs of the building, he would withdraw from the particular incidence."

169. AW1 perceived the conflict of interest as that between his firm and the affairs of the Building, but not as between his personal interest and the affairs of the Building, or between his personal interest and his position as legal advisor. He had not taken an opportunity to assert that he had given advice according to the law, even when it was against his personal interest as an owner.

170. On 30th April 1996, when the Owners' Committee with RW3 in the chair met, the discussion on conflict of interest was confined to the situation that AW1's firm was the Applicant's tenant.

171. The Committee members were concerned when the legal advisor was the tenant of an owner. Their concern would be greater when the legal advisor was the shareholder and director of an owner. That fact had never been recorded in the minutes over the years. It would be logical to conclude that the Committee members were never informed.

172. AW1's firm resigned from the position of solicitors in the Peninsula Knitters case. AW1 resigned as the legal advisor. His letter showed that AW1 saw himself as being personally appointed.

173. AW1's evidence was that he resigned because of RW3's attitude, and his asking AW1 to reduce his fees or give advice for free. AW1 alleged that the 1st Resolution was RW3's revenge. RW3 denied this. He spoke highly of AW1, and was satisfied with the alternative suggested by AW1.

174. AW1's reasons for resignation were not clear. He was convinced that the majority owners were always trying to benefit from the minority owners. SL & CAC together did not amount to an absolute majority; they owned 47.06% of the shares. They paid a bigger share of the management expenses. There was no unfairness in the allocation of shares.

175. In the Owners' Committee, each owner had only one vote, regardless of shares. The Owners' Committee took charge of most management matters.

176. It was only necessary to hold an Owners' meeting because the Owners' Committee was unable to resolve the question.

177. In the Committee meeting on 28th May 1996, for the purpose of dealing with the subject matter of the 2nd Resolution, AW3 was asked to explain her letter which stated AW1 was her partner for over 20 years. AW3 did not tell the meeting that this was a fact known to the owners, but only asked that the query be addressed to her in writing. The Applicant did not dispute the accuracy of the minutes.

178. This set off a chain of events leading to the notice of the EGM on 26th June 1996. AW1, his firm and the Applicant did not responded to the letter from SL stating that AW1 was found to be a director of the Applicant from a Company search. The Applicant stated that the conflict of interest was the imagination of R2 and SL. There was no assertion that full disclosure had been made before.

179. RW3 did not provide the wording of the 1st Resolution. The Applicant could have asked to amend the wording of the 1st Resolution, but did not do so.

180. AW1 was given the opportunity to speak on the issue at the meeting.

181. Out of the total shares of 13,615, shares of 9,807 were voted. The resolution was passed with 7383 shares for, 1459 shares against and 965 abstaining. 54.22% voted for the resolution. Apart from SL & CAC, another 974 shares voted for the resolution. The majority owners were merely exercising their rights. Calculation of the shares would show that SL & CAC also owned office units. Decisions affecting the office towers would affect them also.

Submissions

182. AW1 & 3's contentions that there had been prior disclosure of AW1's interest could not stand. The proper procedure was to do so in the notices of meetings dealing with the appointment and re- appointment. The Respondents relied on the case of Incorporated Owners of Beverly Heights v. Kwok Yui Sun [1996] 1 HKC 499.

183. The Applicant did not make out its case of conspiracy. No owner was prevented from attending or voting in the EGM. The fact that SL & CAC voted according to their interest was just an exercise of their rights as owners. They had not acted fraudulently or oppressively.

184. The owners received letters sent to them before the meeting. They were aware of the nature of the resolution. AW1 had a chance of putting his case. There was no conspiracy among the owners.

185. The resolution was passed by a majority in the EGM, and was binding and valid, as long as it was within the power of the Meeting. It was submitted that this was within the power of the Meeting.

186. The Applicant contended that since there had not been any particular incidence of conflict, it would not be necessary to engage solicitors to investigate the matter. For this reason, the Applicant considered that the resolution was passed with ulterior purposes.

187. AW1 cannot use the Applicant to ask the Tribunal whether there was in fact conflict of interest. The Tribunal was not concerned with this question. The Tribunal was only concerned with whether it was lawful for the owners to engage solicitors to look into the question. If the Owners' Meeting was seised of the matter properly, the Applicant could not ask the resolution to be overturned by the Tribunal.

188. The Manager's complaint to the Law Society was post-event, and cannot show whether the 1st Resolution was intra vires the Meeting. It was action taken on advice from the Manager's solicitors. There was no evidence to show there was a conspiracy involving R1, RW3 of R2, SL & CAC. The conspiracy theory was not part of the Applicant's pleaded case. It should be disregarded. In a letter issued shortly after the EGM, the Applicant did not complain that the resolution was void for exceeding the power of the meeting.

189. The Applicant's case, either on the DMC or merits must fail.

Legal status of the resolutions passed in a meeting of owners

190. By virtue of S.34C (1) of the BMO, Part VIA applied to the Building. Under S.34C (2), Part VIA prevailed over the DMC.

191. The 1st and 2nd Resolutions were the resolutions of the owners under S.34D (3)(b). Under S.34E, the Seventh Schedule of the BMO was incorporated into the DMC, and prevailed over inconsistent terms. The Eighth Schedule was incorporated into the DMC if consistent with the DMC. The 1st and 2nd Resolutions were not resolutions of the owners for the purpose of the Seventh Schedule.

192. The Manager was bound by the Seventh Schedule. Unless approved by the Owners' Committee by way of approval of the annual budget, or by resolution, there could be no expenditure of the Management Fund.

193. Clause 10(29)(a) of the DMC provided that the Manager had full and unrestricted authority to do all acts and things as may be necessary or requisite for, and incidental to, the management of the Building. The Seventh Schedule and the BMO did not take away that power. The Owners' Committee could not force or direct the Manager to do anything or incur expenses if the Manager decided otherwise.

194. A resolution of the Owners' Committee would bind all owners, but not the Manager, except for the Manager's termination.

195. It was for R1 alone to decide what items were to be incurred from the management fund. A recalcitrant manager could only be terminated, or sued in contract for breach of fiduciary duty.

196. R1 considered that it was not bound by the 1st and 2nd Resolutions. They reflected the concern, desire and consensus of the owners, that the Manager should take some action, and for the costs to be paid out of the Management Fund. R1 could decide what to do.

197. The Owners could not criticize R1 for applying to the Owners' Committee for approval to expend the Management Fund. There was no application against R1 personally or against the Owners' Committee for authorizing the expenditure. The indemnity sought was misconceived.

198. As an injunction could only be granted to protect against a proven cause of action, a matter entirely within R1's discretion would not be subject to that. The application was against R1 in its representative capacity only.

199. The Applicant's application on the 1st Resolution should be dismissed.

The 2nd Resolution

200. The Applicant's grounds for challenging the 2nd Resolution were the same as against the 1st Resolution.

201. The Applicant alleged that since it was a personal dispute between AW1 and RW3, the 2nd Resolution was not the business of the Owners' Meeting.

202. The 2nd Resolution did not clarify what exactly was the "matter" to be pursued by solicitors appointed, but it did specified that it was to be done at the expense of the Management Fund, and the resolution was for the consent to do so.

203. R1 contended that the subject matter of the 2nd Resolution was such matters arising out of R1's repetition of RW3's recollection. It concerned and related to the Building, and was within Clause 20(c) & (o) of the DMC.

Background

204. It was started by AW1's resignation on 2nd May 1996. It was on 3rd May 1996 that it was resolved that the previous legal advisor be appointed again. K. T. Lau of R1 informed RW3 of his embarrassment in so doing. RW3 mentioned what he had heard from others about the opinion of the committee in 1993. K. T. Lau agreed. To explain the decision, R1 wrote the letter of 10th May 1996.

205. RW3's evidence in court was that he did not recall the incidence, he just heard about it. The Applicant considered that it could be viewed as defamatory. The Applicant wrote to put on record that it had not made the comment. The Applicant and other owners asked for a Committee meeting to discover the truth of RW3's recollection. At the time, the Applicant did not treat this as a personal dispute between AW1 and RW3.

206. R1 informed the Applicant that it was R1's position that the then Committee had expressed such an opinion in the meeting on 11th June 1993. It was said that AW2 recalled it as well. AW1 was AW2's representative in that meeting. The Committee resolved to withhold payment to the then legal advisor. By then, it was no longer whether RW3 could or could not recollect which was in issue. R1 maintained that what RW3 related was true. If the former legal advisor were to take action in defamation, it would be against AW1, RW3, R1 and all members of that Committee. By repeating RW3's remarks, R1 opened itself to action in libel by AW1, the former legal advisor and the Committee of 1993. RW3 would be in the same position. In sending out the letter dated 10th May 1996, R1 was discharging its duty as Manager. Should a case in defamation be successfully made out against R1, the owners would have to indemnify R1.

207. The Applicant and some owners took the matter to the Owners' Committee, when they asked for a meeting for AW1 and RW3 to give their versions of the situation. AW1 accepted that this was more than a personal dispute between AW1 and RW3, as it concerned other Committee members. He agreed that the matter related to the Building and must be discussed by the Committee.

208. The meeting was also asked to discuss the appointment of a legal advisor for the Committee. AW3 agreed that the Applicant was concerned with the legal consequences of RW3's recollection.

209. The requested Committee meeting took place on 28th May 1996. From the minutes, it could be seen that there was no resolution. The Manager then issued the notice of EGM, for discussion of the 1st and 2nd Resolutions. All the interested parties spoke at the meeting.

Submission

210. R1 submitted that the subject matter of the 2nd Resolution was connected with the Committee members and the Manager. There was possible legal liability incurred by the Committee members and the Manager, when discharging their duties and functions under the DMC. The 2nd Resolution was to allow the use of Management Fund for the possible legal consequences arising.

211. The owners were concerned that this incidence would obstruct the exercise of the functions of the Owners' Committee and the Manager. The appointment of solicitors was in their interest, as it would relieve the Owners' Committee and the Manager. They could then perform their duties under the DMC.

212. This matter arose out of an Owners' Committee meeting. It was in the interest of the Building that it was disposed of. It related to the Building, and was not ultra vires.

213. The injunctive relief sought was misconceived.

214. The Applicant's application on the 2nd Resolution should be dismissed.

The 3rd Resolution

215. The 3rd Resolution was passed on 21st November 1996. This in effect was the authorization of the Owners' Committee to appoint Newco Company to erect a shopping directory counter, using Management Fund.

The pleaded case

216. The Applicant contended that the Owners' Committee exceeded its powers, when it authorized the use of Management Fund, since the information counter was for the sole benefit of the shop owners. The use of common areas was also incorrect.

Nature of the 3rd Resolution

217. Under the Seventh Schedule of the BMO, the Owners' Committee had the authority to approve expenses by resolution. The Applicant's contention that it had no such power must fail.

Subject matter

218. The erection of shopping directories falls within the management of the Building and the duties of the Manager, under Clause 10(14) & (29)(a) of the DMC. They were part of the building facilities and were for common use. The Manager had the discretion, under Clause 10(14) of the DMC, to do all things necessary and desirable for the maintenance of facilities and services in the Building, for the enjoyment and use of the Building by owners, occupiers and their licensees. Under Clause 10(29)(a), the Manager could do things which were reasonably incidental to the Management of the Building.

219. There was no dispute that SL was responsible for the erection and maintenance of original shop directories it had replaced. However, the information counter was to prevent the use of unsightly stickers, and not in the same category.

220. In April 1996, there was no discussion on the replacing of office directories. When the directory matter were discussed again on 18th July 1996, it was expended to include the replacement of all office directories and the erection of the information counter. The Owners' Committee did keep the office owners' interest in mind. The new information counter was erected to be in line with the change in signage and logo of the Building. Even without the interference of the shop owners, the old directories would have been replaced with management expenses. The replacement of the office and shop directories was discussed as a single project. On 12th September 1996, the Committee voted for the use of aluminum plates for replacement of information counter and office directories.

221. On 21st November 1996, the 3rd Resolution was passed. The budget for the information counter was about a third of that for the office directories. AW2's suggestion in the meeting was that the shop owners should contribute towards the office directory expenses, but the office owners would not do so for the information counter. If the Management Fund should not be expended for the information counter, neither should it be expended for the office directories. The shop information counter was for the benefit of all owners as it would enhance the environment of the Building, and increase its value. The information counter became part of the Building's facilities and a part of the common area. The expenses were correctly incurred. There was no ground for setting aside the 3rd Resolution.

222. There was no improper motive when the Owners' Committee approved the expenses. The Applicant's application on this point must fail.

The 4th Resolution

223. The 4th Resolution was passed in the Owners' Committee meeting on 18th July 1996, that the records of the meetings were to be in Chinese. RW3 placed his casting vote in favour.

The pleaded case

224. The Applicant contended that the resolution did not fall within Clause 21(h) of the DMC, which provided that the purpose of a meeting of the Committee should be to discuss matters relating to the Building.

225. R1 considered that, the language in which minutes of Committee meetings were to be kept related to the proceedings and conduct of the business of the Owners' Committee meetings. It was directly related to the management of the Building, or was incidental to the management of the Building.

226. The recording and tabling of the minutes were essential parts of the procedure of the Owners' Committee meetings.

227. Where it was consistent with the DMC, the Eighth Schedule to the BMO would be incorporated into the DMC. Paragraph 7 of the Eighth Schedule to the BMO provided that the owners' committee should determine the procedure at its meetings. This resolution fell within the incorporated terms.

228. The Applicant's second ground was that the 4th Resolution was discriminatory and intended to cause inconvenience to those Committee members or owners who could not read Chinese. The Applicant said there were implied terms against the restriction of the language to be used in meetings. The 4th Resolution was alleged to be against AW3 personally.

229. R1 considered that whether the resolution was language discrimination was not for the Tribunal to decide. AW3 should apply to the Equal Opportunity Council.

230. AW3 was not a party, she was the representative of the Applicant. AW1 had also acted as the representative of the Applicant. AW1 was fluent in both English and Chinese. Any difficulty caused to the Applicant was of its own making, when it sent AW3 as its representative at the Committee meetings.

231. The resolution was for the medium for recording and publishing the minutes. As long as it was in one of the official languages, it cannot be said to be improper. The Applicant cannot ask that the meetings should be bound to accommodate the representative of corporate members of the Owners' Committee.

232. The 4th Resolution was an administrative decision of the Owners' Committee. If it was passed primarily to facilitate the proceedings of the Owners' Committee, then the fact that some representatives required translation to understand the minutes should not nullify the resolution.

The evidence

233. The evidence was that meetings were conducted in Cantonese and partly in English. AW3 agreed that there was already translation involved when the minutes were prepared in English. Arguments on wordings were incidental and frequent. The issue had been raised before.

234. There was a balanced vote, and RW3 placed his casting vote in favour of Chinese. He was concerned with the avoidance of confusion between English and Chinese versions. His explanation was made before the start of the present proceedings.

235. The 4th Resolution was not improper. The Applicant's application on this should be dismissed.

The Prohibition

236. The minutes merely stated that the "Chairman indicated that such additional service should not be rendered in the future." R2 was the Chairman. RW3 was R2's representative only.

Nature of the objection

237. There was no resolution in respect of the Prohibition. The Owners' Committee performed its duties collectively. The individual officers performed their duties personally. The representative was only there to perform the corporate member's duty as Chairman.

238. The Prohibition was merely a personal request by R2 to R1.

239. The Applicant was not complaining of an act done under the DMC.

240. The Applicant did not plead what gave it the locus standi to make this application. It was only pleaded that the Prohibition was unreasonable. Unless it fell within the Tenth Schedule to the BMO, it should be struck out.

241. RW3 was not acting in the exercise of his duties as the Chairman when he made the request. R2 was not performing a duty under the DMC, which bound the other owners. This was not within the jurisdiction of the Lands Tribunal.

242. R2's personal act did not bind the Owners' Committee or R1. It had nothing to do with the DMC. If R1 had a duty under the DMC towards the Applicant, then the Applicant should seek a mandatory injunction against R1.

243. The Applicant had no cause of action against R2. The Applicant's case should be dismissed.

The evidence

244. RW2's evidence showed that what AW3 contended did not occur. RW2's personal opinion was that it was useless for her to assist AW3 further. RW3 merely indicated that she need not do so, and that R1 should not waste its time. AW3 had exaggerated RW3's comment.

245. The Applicant's case on the Prohibition must fail.

Conclusion

246. The Applicant had looked at the resolutions through coloured spectacles. It considered every act as the result of a conspiracy against it. AW1 & 3 were obsessed with the concept of big owners and small owners. The Applicant was not concerned with fairness between office owners and shop owners, but merely to protect its own interest. The application was AW1's retribution against R1 and RW3 for the complaint to the Law Society.

247. The application was frivolous and vexatious, and should be dismissed with costs.

The Applicant's reply

248. In reply to the Respondents' submission, the Applicant contended that there was no irrevocable power of attorney granted to R1 by the owners, under Clause 9 (c) of the DMC. This was not given to secure a proprietary interest of R1. There were no obligation owed to R1. This was merely an appointment of a salaried manager. R1 refused to bring the application against R2 and the other owners. The power of attorney, granted to R1 under Clause 9 (c) of the DMC, was therefore revocable, and the Applicant was entitled to bring this Application. In any event, the Respondents had not sought to rely on Clause 9 (c) of the DMC to challenge the Applicant's locus.

249. There was no incorporation of owners in the Building. Section 16 of the BMO, which stated that the rights of the owners were to be exercised by the incorporation of owners, cannot apply to the present Application. There is no corresponding provision for buildings without an incorporation of owners. The case of Chau Mei Lee Fragrance v. Ng Yee Tim [1996] 4 HKC 46 is not applicable.

250. The motive of and conspiracy among the majority owners, R1 and R2 are relevant to the Applicant's case.

The 1st Resolution

251. The Applicant's case was that the 1st Resolution was ultra vires and an abuse of power, with ulterior motives.

252. AW1's answer had been taken out of context. His evidence showed that he considered that the 1st Resolution was made against him with ulterior motives.

253. The 1st Resolution had no merit. This Resolution showed the motive and conduct of the majority owners, R1 and R2.

254. The Respondents did not deal with AW1's evidence and documents, which showed he had made prior disclosure of his interest in the Applicant.

255. The Respondents had not defined management matters and matters relating to the owners' interests. This gave rise to an abuse of power. The Owners' Committee could only discuss the Building's management matters.

256. The evidence showed the excuse, that the owners could not decide whether there was a conflict of interest, and decided to engage solicitors to investigate the matter, was merely used to hide the majority owners true intent.

257. Payments made to AW1 were remuneration for legal service. There was no secret profit. AW1 was entitled to such payments for work done.

258. The Respondents failed to explain why was no report made to the Owners' Committee on the appointment of solicitors and the result of any inquiry made.

259. The Respondents failed to call K. T. Lau of R1 to testify and to clarify why AW1 was described as "Legal Adviser by invitation" at a particular meeting. Mr. Lau was responsible for the minutes.

260. AW1 recommended another solicitors' firm on 23rd July 1993. He was later asked to be the legal advisor by the other owners. There was evidence to show that he was chosen because of his accessibility and understanding of the Building.

261. There was already sufficient disclosure in the meeting on 21st March 1995. AW1's letter of 22nd August 1995 was not relevant.

262. The Respondents could not just rely on the minutes alone, ignoring the correspondence. The minutes did not contain all details.

263. AW1 was the sole proprietor of his firm.

264. That the majority owners did not command an absolute majority was not an argument in their favour. The reality was that not all owners would attend a general meeting. The voting was by poll, according to the undivided shares. The shares that the majority owners possessed were sufficient to ensure that the 1st and 2nd Resolutions would be passed in the general meeting.

265. R1 and the majority owners had lied about AW1's non-disclosure. Because of this, there was no resolution in the Owners' Committee. There was no explanation why a general concern on the question of conflict of interest became a personal attack on AW1.

266. The Respondents evidence on the events was not worthy of credence. Their attack on AW1's subsequent lack of response on the 1st Resolution was unmerited. AW1 was then concerned with the events leading to the 2nd Resolution.

267. AW1 and other owners had objected to the 1st & 2nd Resolution. They could not seek an amendment, as they were in the minority at the meeting.

268. AW1 & 3 had made sufficient disclosure of the connection and interest between the Applicant, AW1 and AW1's firm. Whether it was the proper way of disclosure was not the Respondents' pleaded case.

269. It was R1's duty to issue notices of meetings. The Respondents could not rely on R1's failure to do its duty properly as being to their advantage.

270. Citing the case of Eastmanco v. Greater London Council [1982] 1 All ER 437, the Applicant submitted that, the major owners' right to vote in accordance with their own interests was not unrestricted.

271. There was no evidence to support the allegation that all owners received letters prior to the EGM, and so were aware of the nature of the resolution. There was no evidence as to the contents of the letters.

272. The evidence showed that that the 1st Resolution was ultra vires and an abuse of power, with ulterior motives.

273. That it was proper for the owners to engage solicitors, to investigate into the question of conflict, was just an excuse. The Owners' Committee was given no information as to the solicitors appointed, and the results of the inquiry.

274. It was proper for the Applicant to seek to set aside the resolutions.

275. The Respondents did not produce legal advice received pursuant to the 1st & 2nd Resolution. The Respondents cannot now say that the complaint to the Law Society was as a result of legal advice received.

276. The fact that:

RW3 consulted the firm previously involved as the Building's legal advisor, prior to the EGM;

RW3 invited a solicitor from the firm to attend the EGM;

R1 instructed the same firm to investigate the matter;

that firm recommended the lodging of a complaint to the Law Society,

showed that there was a conspiracy among R1, RW3, and the majority owners, SL & CAC against AW1.

277. It is not opened to the Respondents to argue that the resolution of the Owners' Meeting did not bind R1. R1 was to carry out 1st & 2nd Resolutions, but R1 was not given the mandate to decide how to go about it. These were not mere statements, but part of the conspiracy against AW1. They were not concerned with the management of the Building. R1, RW3, and the majority owners, SL & CAC, must obtain the necessary approval for expenses out of the Management Fund through the Owners' Meeting.

278. It was alleged that K. T. Lau of R1 had actively engaged in the conspiracy against AW1. The Applicant was entitled to seek indemnity from R1.

The 2nd Resolution

279. It was the Applicant's case that the part of the 2nd Resolution relating to AW1 was a personal dispute, and not part of the management of the Building.

280. The Respondents' contention that "the matter" in the resolution must refer to the first part of the 2nd Resolution was ridiculed.

281. It was submitted that, there had never been any indication, either in its letters, or in the EGM, that R1 was concerned with its personal liability over RW3's recollection.

282. The Respondents, it was submitted, could not rely on the evidence of RW3, an evasive and unreliable witness with a bad memory. AW1 had denied all along that he had ever made such a comment. The argument initially was on whether AW1 had made the comment. The 2nd Resolution was only drafted in the middle of June 1996.

283. The main issue was, whether RW3's recollection was correct. R1 had a duty to clarify whether RW3 had made the statement and was entitled to qualified privilege. R1 had never said that RW3's recollection was true. R1, in repeating RW3's recollection of what AW1 allegedly said, would be in no danger of being found libelous. RW3 maintained that it was K.T. Lau of R1 who drafted the 2nd Resolution. R1 and R2 had already taken legal advice from the same firm mentioned in the resolution. R1 would know it was in no danger. All these should have been disclosed.

284. The Respondents could not rely on the wording in the DMC "relating to the building" to engage in such abuse of power.

285. It was AW1's evidence that the part of the 2nd Resolution, relating to AW1 personally, was a personal dispute. It should not be resolved in an EGM, and was ultra vires.

286. The Applicant's concern was that, AW1 was personally affected by RW3's recollection. AW1 had, by then, no intention of pursuing the matter further with RW3. The 2nd Resolution was not necessary.

287. There was no evidence that R1 had been affected in the performance of its duties by the dispute. There was no evidence that the appointment of the solicitors had relieved the pressure in any way. The Owners had no power to expend Management Funds on matters not related to the management of the Building, even by resolution.

The 3rd Resolution

288. The Applicant was entitled to respond to issues arising from the Respondents' opposition. It was entitled to add new matters in answer. The Applicant could rely on those new matters as a separate basis to challenge the 3rd Resolution.

289. In fact, the Respondents admitted there was no resolution in relation to the information counter. The appointment of the contractor to erect the information counter depended on a resolution authorizing the erection of the information counter. There had never been such a resolution. The use of the Management Funds had not been authorized and there was misused.

290. The purpose, under paragraph 4(5) of the Seventh Schedule to the BMO, must relate to the management of the Building. The Manager did not enjoy unlimited powers under the DMC. Since the erection of the information counter involved the use of Management Funds and the common areas, R1 must abide by the DMC and the BMO. The owners were under the assumption that SL, which had not re-instated the directories it demolished, would pay for the directory. The Respondents had misled the other owners on this Resolution, and evaded this issue. The Respondents could not explain the reasons for SL maintaining and erecting its directories before this incidence.

291. It had never been the Respondents' pleaded case that the information counter was a fixture and formed part of the common area. It was not a fixture and it encroached on the common areas. The DMC and BMO should apply.

The 4th Resolution

292. If the 4th Resolution were passed with an improper motive, it would be ultra vires.

293. Corporate owners could only attend meetings through human agents. The inconvenience to the human agents would be that caused to the corporate owners. It was reasonable for the Applicant and other owners to ask for bilingual minutes. Bilingual minutes became available six months later.

294. The issue, on the use of Chinese alone as the medium of recording the minutes, only arose after RW3 became the Chairman. RW3's evidence on this point should not be believed.

The Prohibition

295. RW3 was acting as the Chairman of the Owners' Committee meeting, at the time of the issue of the Prohibition. It deprived AW3 of her right to participate fully in the Owners' Committee meetings. This fell within the DMC, and paragraphs 5(d), 8 & 9 of the Tenth Schedule.

296. As RW3 was representing R2, his act must bind R2. RW2 had complied with RW3's prohibition, since he was the Chairman of the Owners' Committee. RW2 was not a credible witness.

297. Since the Chairman of the Owners' Committee was restricting R1 as the Manager, the Chairman was ultra vires the DMC, and it was proper for the Applicant to seek an injunction against R2.

The Application

298. The application, when seen against the background, was not frivolous and vexatious. The Respondents failed to answer many pertinent questions. The resolutions were part of a conspiracy among R1, RW3, SL & CAC. It was an abuse of power, which the Tribunal should not allow.

Decision

299. At the commencement of the hearing, it was not the Applicant's case that the Tribunal should decide whether there was, in fact, conflict of interest, under the 1st Resolution. The Applicant was not seeking to establish the accuracy or otherwise of RW3's recollection, under the 2nd Resolution. The Applicant was not asking the Tribunal to inquire into the merits of the Resolutions. It was not in dispute that the procedures for passing the Resolutions had been complied with. The Applicant asked for declarations that the Resolutions and the Prohibition were ultra vires, of no effect and ought to be set aside. It sought injunctions to restrain R1 from acting under the Resolutions, and for indemnity to the management fund under the 1st to 3rd Resolutions. It aimed to establish whether the use of management fund under the Resolutions was proper and warranted.

300. The Applicant relied heavily on evidence, which it alleged, showed a conspiracy among R1, R2 and the majority owners, SL& CAC. It was the Applicant's contention that while it was not its pleaded case, the Tribunal should find there was a conspiracy, and that was a fact in the background which should be taken into consideration when deciding on the application. It was said to show the true motives of R1, R2 and the majority owners. The Applicant's case was that R1, R2 and the majority owners were avenging themselves against the Applicant, for being uncooperative, with the 1st, 2nd and 4th Resolutions. In doing so, they were making improper use of the management fund to further their own ends.

The 1st Resolution

The first resolution was that the owners were:

" To appoint solicitors at the expense of Silvercord Management Fund to clarify the questionable conflict of interest of Mr. Tong Chan, the former legal advisor of the building."

301. In relation to the 1st Resolution, the Applicant pointed to evidence that showed there had been prior disclosure of AW1's capacity, and his relation with the Applicant. There was some documentary evidence to this effect. However, it was not clear whether all the members of the Owners' Committee throughout the years were aware fully of the fact and its implication. There was no evidence that the impact of AW1's dual capacity had been explained and impressed upon the owners. For the evidence, it is apparent that the Committee and the owners in general had not applied their minds to the full implication. On the evidence, it is found as a fact that when the question of conflict was raised, the Owners' Committee could not come to a decision on their own, and the question was put to an EGM. As lay persons, the owners were not obliged to burden themselves with deciding difficult legal questions. They were entitled to seek expert assistance, and to use the management fund to do so. The 1st Resolution was the result of such a collective decision. The matter arose out of the appointment of a legal advisor to the Owners' Committee. This was an appointment for which management fund had been expended. It came under the context of management of the Building. The owners were entitled to set their minds at ease. It cannot be outside the powers of the owners in the EGM. The 1st Resolution is not ultra vires or of no effect. The 1st Resolution should stand.

302. It must be borne in mind that the Tribunal had not been asked to, and is making no findings on whether there was conflict of interest.

The 2nd Resolution

The second resolution was that:

" After the further report by the Chairman of Owners' Committee on the comments made by Mr. Tong Chan of Tong Chan & Company, and Ms. Mavis Wong of Aisabest Services Limited on the Chairman's recollection that "Mr. Tong Chan and the then Owners' Committee had in 1993 opined that Deacons was slow and expensive" in handling the legal proceedings taken against the owners of Suites 801-6, Tower 1 for its encroachment upon common areas, to appoint solicitors to pursue the matter at the expense of Silvercord Management Fund."

303. This arose out of a letter on 10th May 1996, which R1 wrote to the Applicant, copied to the members of the Owners' Committee. It was an attempt to explain why the previous legal advisor, replaced by AW1, was being re-appointed. The Applicant disputed the contents of RW3's recollection. The matter ultimately went to the EGM, after exchanges of correspondence among the Applicant, R1 & R2, where demands for apologies and threats of legal action were made.

304. It is found as a fact that from the evidence, the Applicant was concerned about possible action in defamation. There was a legitimate ground for concern. The opinion expressed to be that of AW1 and the Owners' Committee of 1993, if really made, would amount to a comment on the professional conduct of a firm of solicitors. It could have given that firm of solicitors a cause of action against AW1, all the members of the 1993 Committee, RW3 and R1.

305. R1 wrote that letter in its capacity as Manager, while engaged in the management business of the Building. The letter was written to explain another step taken in the management of the Building, the re-appointment of a legal advisor in an on-going case. The case was against an owner for encroachment on common areas. That was also management business.

306. In repeating RW3's recollection, without verifying the truth of the contents, which it could have done from perusing the relevant minutes, R1 became involved in potential litigation. While R1 was acting as the agent of the owners, under Clause 10 (a)(23) & (24) of the DMC, any action against R1 would be action against the Owners. As the Manager, R1 was entitled to look to the owners for indemnity, if in the course of performing its duties, R1 became involved in legal proceedings.

307. The other members of the Committee and the other owners would have found it difficult to decide what was a proper course of action to be taken in the circumstances. There was a dispute between the Manager R1, the Chairman R2, and the Applicant on some event that could have occurred some 3 years ago. There were some vague recollections that certain comments had been made, but the evidence showed that no one could remember any details.

308. The Tribunal accepts that the threat of possible legal action from any quarters was something the owners were not prepared to deal with by themselves. They were entitled to protect their position by engaging professional assistance to sort out the situation.

309. Merits did not come into the picture.

310. Conspiracy, though relied on, was not part of the Applicant's pleaded case. The Respondents had not been prepared to address that in its opposition. The Tribunal makes no ruling on this point.

311. The 2nd Resolution is not ultra vires or of no effect. The 2nd Resolution should stand.

The 3rd Resolution

312. The 3rd Resolution was the appointment of Newco Company to erect a shopping directory counter in the common area on the first floor of the Building at the expense of the management fund.

313. A detailed examination of the documents showed that there was no resolution of the Owners' Committee approving the erection of the counter out of management funds. There was no resolution allowing the counter to be erected in the common areas. This was not the replacement of existing directories that came with the Building and was part of the original fixtures. The correct procedure had not been complied with. There had been no rectification.

The 3rd Resolution is in breach of the DMC and the BMO.

The 3rd Resolution should be set aside.

R1 is restrained from acting in pursuance of the 3rd Resolution.

R1 should seek the recovery of the expenses from the relevant owners, on behalf of all owners of the Building, to indemnify the management fund.

The 4th Resolution

314. The 4th Resolution was for the use of Chinese as the medium of recording and preparing the minutes. This was viewed as ultra vires and ought to be set aside.

315. The Applicant relied on the fact that its usual representative, AW3, was not able to read Chinese to say that the resolution was part of the conspiracy against it.

316. The Owners' committee was entitled to regulate its procedures. There was no obligation to cater to the specific needs of each individual owner. The majority of the owners sent representatives who could read Chinese. The meetings were conducted mainly in Cantonese, supplemented by English. There was evidence that the move was aimed to allow minutes to be prepared with speed. There was no evidence that the decision was made just to deter AW3 in her participation on management matters. There was no requirement in either the DMC or the BMO as to the language medium to be used. That being the case, either of the languages under the Official Languages Ordinance should suffice. As long as it was within the bounds of law, the Owners Committee was entitled to decide on its proceedings or any change thereto.

317. As stated earlier, conspiracy had not been part of the Applicant's pleaded case. R1 did not rest its opposition on that ground. The Tribunal will not rule on that point. Neither will the Tribunal rule on the point of merits, as it was specifically stated not to be required in the commencement of the case.

318. The 4th Resolution is to stand.

The Prohibition

319. The Prohibition was RW3's remark made to RW2 on being informed that RW2 had assisted AW3 in the understanding of the minutes in Chinese, during a Committee meeting on 10th March 1997.

320. The Tribunal did not accept that what transpired during the meeting amounted to a prohibition issued by R2 to R1. From the evidence, even RW2 considered her efforts to be futile, and that assistance to RW3 would serve no useful purpose. She agreed that assistance would not be rendered further in that respect. In any event, R1 had no responsibility, under the DMC, to provide translation service to representatives of individual owners.

321. The Applicant is not entitled to the declaration sought.

322. Costs to the Respondents to be taxed if not agreed.