UNIQUE REALTY LTD AND ANOTHER v. HONG KONG REAL ESTATE AGENCIES GENERAL ASSOCIATION LTD AND OTHERS

HCMP 1132/2023

[2024] HKCFI 418

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1132 OF 2023

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REASONS FOR JUDGMENT

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1.  The Originating Summons before the Court, filed on 19 July 2023 by the Plaintiffs, mainly concerned the validity of the election of the 16^th Executive Committee (“EC”)  of the 1^st Defendant’s Central-Western District Branch (“CW Branch”)  held at an Extraordinary General Meeting (“EGM”)  which took place on 11 April 2023. The Plaintiffs were amongst the members of, purportedly, the same EC which was elected at an Annual General Meeting (“AGM”)  held 2 days later on 13 April 2023.

2.  Primarily, the Plaintiffs’ case was that the election of the 16^th EC at the EGM was invalid for breach of the Articles of Association of the 1^st Defendant (“AA”), in particular, the EC could only be elected at an AGM of the CW Branch.  On the other hand, the 2^nd to 21^st Defendants who were elected to the 16^th EC at the EGM contended that they were duly elected and the election at the EGM was invalid.

3.  The 1^st Defendant took a neutral stance in these proceedings.  However, Mr Wong, who appeared for the 1^st Defendant, helpfully identified 3 fundamental issues with these proceedings two of which (the jurisdiction of this Court and the propriety of using the Originating Summons procedure on these matters), if accepted by the Court, might be fatal to the same. 

4.  Having heard the parties on the 3 issues raised by the 1^st Defendant, the Court dismissed the Originating Summons at the hearing and awarded the costs of and occasioned by the Originating Summons against the Plaintiffs.  These were my reasons.

Background

5.  In order to understand the issues, it is necessary to sketch out an outline of the background facts.

6.  The 1^st Defendant was an incorporated body.  It was a general association of various real estate agencies in Hong Kong.  Its members were the real estate agencies.  To cater for the special interests of agencies in different areas, there were altogether 27 branches under the 1^st Defendant which were demarcated by districts.  CW Branch was one such branch.  As of April 2023, the 1^st Defendant had 3,731 members, with 228 of them belonging to the CW Branch.  

7.  The present dispute arose out of disagreements between the founding and honorary chairman of the CW Branch (“Li”)  and the chairwoman of the 15^th EC of the CW Branch (“Cheng”).

8.  The 2^nd to 21^st Defendants were the elected members of the 16^th EC pursuant to an EGM of the CW Branch held on 11 April 2023 (“the EGM”), whereas the Plaintiffs were two of the 16 elected members of the 16^th EC pursuant to an AGM of the CW Branch held on 13 April 2023 (“the AGM”).  The EGM was apparently initiated by Li, whereas the AGM was called by Cheng.

9.  On 27 April 2023, the EC of the 1^st Defendant (“EC (D1)”)  held a meeting and resolved to decide on which team of elected 16^th EC of the CW Branch to endorse by voting.  The result was in favour of endorsing the team elected at the EGM (the 2^nd to 21^st Defendants).

10.  Since the commencement of these proceedings, 3 of the 16 elected members under the AGM had resigned from the 16^th EC of CW Branch, whilst one had indicated its neutrality to the dispute between the Plaintiffs and the Defendants.

1^st Defendant and its branches

11.  I agreed with Mr Wong that the characterisation of the true nature of the CW Branch was relevant and crucial to the issues of whether elections of the CW Branch were governed by the Companies Ordinance, Cap 622 (“Ordinance”)  and/or the AA.  They went to the jurisdiction of the Court in these matters.

12.  There was no dispute that the CW Branch was never incorporated under the Ordinance (whether in its existing or previous form). 

13.  It was trite that an unincorporated entity is not recognised by law as having an independent legal existence: Chitty on Contracts, 35^th edn, vol 1, [13-065] :

“An unincorporated association is not a legal person and therefore cannot sue or be sued unless such a course is authorised by express or implied statutory provisions as in the case of a trade union and a trustee savings bank. Nor can a contract be made so as to bind all persons who from time to time become members of such an association. But a contract purportedly made by or with an unincorporated association is not necessarily a nullity. If the person or persons who actually made the contract had no authority to contract on behalf of the members they may be held to have contracted personally. On the other hand, if they had the authority, express or implied, of all or some of the members of the association to contract on their behalf, the contract can be enforced by or against those members as co-principals to the contract by the ordinary rules of agency.”

14.  Article 9 of the AA provided for the relationship between the 1^st Defendant and the branches.  Article 9.3 stipulated that each branch was a separate entity and exercised independent administrative powers (“分會或屬會為一個獨立個體，有行政自主權，並可因應個別地區的需要制定有關政策、會員守則或其他規章制度供其會員遵守，唯該等政策、守則或規章制度須以本會所簽訂的協議為依歸，並符合本會組織大綱及組織章程所訂定的原則”).

15.  There was an agreement made on 10 April 1995 (“Agreement”)  between the 1^st Defendant and the Western District Real Estate Agents Association (represented by Li).  There was no controversy that it represented an agreement between the 1^st Defendant and the CW Branch.  The Agreement governed the relationship between the 1^st Defendant and the CW Branch.  Clause (6)  of the Agreement provided that elections at the branch level should be left to the autonomy of the branch (“總會同意有關分會區內之選舉權必需交由分會自行選定”). 

16.  Clause (6)  was not consistent with the Plaintiffs’ reliance on the AA as governing the CW Branch elections.  However, Mr Yeon, who appeared for the Plaintiffs argued that Clause (14)  of the Agreement, which provided that the CW Branch agreed to abide by the AA, regulations, directions and decisions passed by the 1^st Defendant (“分會同意遵守總會之會章及日後發出之會內規則，守則，指令及決議”)  gave rise to the obligation by the CW Branch to abide by the AA, including those provisions on elections.

17.  Ironically, the 1^st Defendant also relied on Clause (14)  of the Agreement for its argument that the CW Branch was bound by the resolution of the EC (D1)  passed on 27 April 2023 to resolve the dispute between the two 16^th EC of the CW Branch.  However, Mr Wong submitted that this was not an issue requiring the determination of the Court unless this application could overcome the fundamental objections raised by the 1^st Defendant. 

18.  The Plaintiffs’ evidence, which was disputed, suggested that elections of the branches were conducted in accordance with the AA.  I agreed with Mr Wong that the voluntarily adoption of the AA for the conduct of CW Branch meetings did not affect the legal analysis as to whether meetings of an unincorporated branch were governed by the AA and/or whether the Plaintiffs might rely upon the Ordinance to make out their claims.

Reliance upon the AA and the Ordinance

19.  In this action, the Plaintiffs relied, centrally, upon alleged breaches of Article 16 of the AA, which governed the meetings of the 1^st Defendant’s members, to ground their case of irregularities and invalidity of the election of the 16^th EC under the EGM.  In particular, Article 16.4 was relied upon for the alleged lack of sufficient notice for the EGM, and Articles 16.1(c)  and 16.2 were relied upon on the requirement to appoint EC at AGM rather than EGM.

20.  However, s.728(4)(c)  of the Ordinance on which the Plaintiffs relied to give rise to the Court’s jurisdiction in these matters could only be applied to the breaches of a company’s articles. 

21.  Aside from the fact that CW Branch was not a company, it was quite clear that the Article 16 could not be invoked to apply to the elections of the CW Branch.  Article 1 which set out various definitions for the provisions under the AA, stated that :

(1)  “members” only referred to members of the 1^st Defendant (“「會員」指目前經已進行會員註冊登記的本會會員”); and

(2)  “members’ meetings” only referred to AGMs or EGMs of the 1^st Defendant (“「會員大會」指本會會員的週年大會或特別大會”).

22.  Read in conjunction with the provisions under Article 9 of the AA, it was not reasonably arguable that the elections of the CW Branch were governed by the AA.  In my view, it was reasonably clear that all members of the 1^st Defendant were required to comply with the AA when it came to the elections of the 1^st Defendant.  However, the CW Branch was free to adopt such procedure as it desired for its own elections. It could have adopted the relevant provisions of the AA, but the breach of such provisions would not give rise to the jurisdiction of the Court on disputes over elections because CW Branch was not a company.  This answered also Mr Yeon’s reliance on Clause (14)  of the Agreement (see para 16 above).

23.  I was unable to find any real answer provided by Mr Yeon on this fundamental objection of the 1^st Defendant.  The other Defendants, represented by Ms Tang, also relied on this objection but nothing further had been added to Mr Wong’s submissions.

24.  For this reason alone, this Originating Summons must be dismissed.

25.  It was unnecessary to determine the other two issues raised by the 1^st Defendant.  However, it should be mentioned, firstly, that the Plaintiffs had half-heartedly complained about the endorsement of the 2^nd to 21^st Defendants as members of the 16^th EC by the EC (D1)  on 27 April 2023 (see para 9 above and para 4 of the relief sought in the Originating Summons).  It was a half-hearted complaint because the Plaintiffs did not advance any ground for the challenge in their supporting evidence.  They only made some vague allegations about lack of advance notice for the discussion on the topic at the 27 April 2023 EC (D1)  meeting in their reply evidence after the Defendants pointed out the absence of ground for the challenge. 

26.  Unless the ground for challenge was made clear, eg, which specific provision of the AA was allegedly breached, there was no substance in the complaint and it should be ignored by the Court.

27.  Secondly, the Plaintiffs sought against the 1^st Defendant an injunction to restrain their expulsion as its members (para 5 of the relief).  Mr Yeon accepted that the 1^st Defendant had the power to expel them pursuant to Article 7.2 of the AA.  However, such power had to be exercised in good faith for the benefit of the 1^st Defendant (citing Baillieu v Foreign Correspondents’ Club, Hong Kong [2007] HKLRD 229, [11]).  The premise of the Plaintiffs’ case was that they were properly elected as members of the 16^th EC. 

28.  The evidence showed that the EC (D1)  was trying to put an end to the quarrel between the two 16^th EC of the CW Branch.  After the 1^st Defendant received a letter before action from the Plaintiffs’ solicitors dated 9 June 2023, which it considered had caused damage to its reputation and/or interest and was a breach of Article 7.2, it called for an EC (D1)  meeting on 31 July 2023 to resolve a proposed resolution to expel the Plaintiffs and the Plaintiffs were asked to provide their written explanation and to attend the meeting to offer their explanation.  The meeting never took place due to an interlocutory injunction obtained by the Plaintiffs on 28 July 2023 pending the determination of the Originating Summons. 

29.  The injunction expired upon the determination of the Originating Summons on 1 February 2024.  In light of the dismissal of the same, there was no reason to grant any injunctive relief in favour of the Plaintiffs.  In any case, they should take advantage of the opportunity offered by the EC (D1)  to explain their actions.

30.  Finally, the 1^st affirmation of Yeung Wai Kwok filed by the 2^nd to 21^st Defendants on 6 September 2023 contained a counterclaim about the validity of the 16^th EC elected pursuant to the EGM and invalidity for the one elected at the AGM.  Apart from the fact that it was not pressed by Ms Tang in her skeleton submissions, for the reasons stated above, the elections of the CW Branch did not fall within the jurisdiction of the Court.