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

CACV 1/2004

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1 OF 2004

(ON APPEAL FROM LDBM NOs. 83/2003, 84/2003 & 85/2003)

_______________________

______________________

 ______________________

J U D G M E N T

______________________

Hon Yeung JA (giving the judgment of the Court) :

Background

1.  Tsuen Wan Garden (“the Building”) is a multi-storey building with residential flats, car parks and shops.

2.  The applicant is the Incorporated Owners of the Building and the respondent is the registered owner of the following parts of the Building, namely, (1) the entrance and exit on the upper ground floor; (2) the whole of 1^st floor; and (3) shops Nos. 1, 6, 8, 9, 10, 11 and 19, on Podium A (the properties).

3.  It is not disputed that the respondent, as the registered owner of the properties, owns a total of 458 shares out of 4,400 equal undivided shares of the Building, including 881 shares assigned to Podium A.

4.  It is also not disputed that owners of the Building are subject to the provisions of a Deed of Mutual Covenant Memorial No. 215174 (“the DMC”) in respect of the Building.

5.  At or about the end of 2002 or early 2003, a decision was made to carry out repair and improvement works to the Building by Cedar Construction Co. Ltd. at the total costs of $16,680,000.00 and that owners of the Building would share the total costs by four instalments payable on 25 January 2003, 31 March 2003, 15 May 2003 and 30 June 2003 respectively.

6.  It was the applicant’s case that the total cost for the repair and improvement works to Podium A was $3,221,925.44 and that as the owner of 458 shares out of 881 shares assigned to Podium A, excluding car parks, the respondent was liable to pay the first two instalments amounting to $927,273.70.

7.  The respondent failed and/or refused to pay the aforesaid instalments; the applicant therefore commenced proceedings in the Lands Tribunal to recover the same.

8.  On 15 December 2003, Judge Yung (“the judge”) dismissed the applicant’s claim with costs. The applicant now appeals against the judge’s order.

The Facts

9.  At the owners’ meeting on 25 November 2002 to decide if the repair and improvement works would be carried out, three renovation plans: 1, 2, and 3 of different scales were put to a vote and the owners were given the option of choosing one of those plans.

10.  The total number of shares present in person or by proxy was 1024, and 998 shares cast their votes: 438 shares for plan 3, 307 for plan 2, and 253 for plan 1. Plan 3 was then declared passed.

The Issue and the Judge’s Decision

11.  The only issue before the judge was whether the resolution was validly passed in accordance with Clause k of the Fourth Schedule to the DMC and paragraph 3 (3) of the Third Schedule to the Building Management Ordinance, Cap. 344 (“the BMO”), which provide respectively the following:

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

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

12.  There is no dispute that paragraph 5(8) of the Third Schedule, namely that “In the event of any inconsistency between this Schedule and the terms of a deed of mutual covenant or any other agreement, this Schedule shall prevail” applies and hence the issue only concerns the proper interpretation of the Third Schedule as to what constitutes a validly passed resolution.

13.  It was the respondent’s contention that a majority of the votes of 998 shares meant at least the votes of 500 shares. As only 438 shares supported plan 3, the motion failed to carry and the resolution was invalid; hence, the respondent was not obliged to contribute towards the cost of the repair and improvement works.

14.  The judge agreed with the respondent’s contention. The judge held that “the ultimate question is whether those voting for plan No. 3 outnumbered those who were against it”.

15.  The judge concluded that those owners who originally voted for plan 1 or 2 might not have voted for plan 3 and a further vote, possibly with only two options, was necessary to decide a majority of votes of the owners, namely more than 50% of the votes.

16.  The judge held that as plan 3 had not been passed by a majority, namely by more than 50% of the votes, the applicant’s claim failed.

Grounds of Appeal

17.  Mr Dykes SC, on behalf of the applicant, raises a very simple point of construction. He suggests that “majority” simply means “the greater number of part in the sense that 5 votes cast is greater than 3 votes and is greater still again than 2 votes cast in an election where there are 3 candidates”. Hence, the 438 votes for plan 3 was indeed the majority of votes comparing with the 307 votes for plan 2, and the 253 votes for plan 1.

18.  Mr Dykes suggests that unlike a resolution involving just two options, the matters referred to in paragraph 3(3) of the Third Schedule may involve three or more options and hence of a majority can be less than 50% of the cast votes as long as the greatest number of the votes supports it.

19.  Mr Dykes also refers to the Chinese text of paragraph 3(3) of the Third Schedule, namely:

“除第10（1）條所規定外，在出席人數達到法定人數的法團會議上提出的一切事項均由業主投票表決，以多數票決定。”

20.  Mr Dykes emphasizes that the Chinese text of majority is “多數” (duoshu) (a greater number) and not “過半數” (guo banshu) (more than half) as used in the Chinese texts of some other ordinances.

21.  He suggests that the distinction is significant to show that the legislature intends “多數” (duoshu) to mean differently from “過半數” (guo banshu) (more than half). He argues that “majority” “多數” in the BMO simply means greater in number and need not be more than half.

22.  Mr Dykes further argues, as his fallback position, that if there is any discrepancies between “majority” and “多數” (duoshu), the court should in accordance with section 10B(3) of the Interpretation and General Clauses Ordinance, Cap. 1 and having regard to the object and purposes of the BMO, reconcile the difference in the two authentic texts by giving effect to the Chinese term “多數”(duoshu), which he says is more precise than the English term “majority”.

23.  Insofar as paragraph 3(4) of the Third Schedule refers to “雙方” (shuangfang) (two parties), Mr Dykes adopts a different approach. He says there are clearly inconsistencies between the two authentic texts of the BMO and as the Chinese text is a translation of the original text in English, the court should adopt the reasoning of Cheung J in Chan Fung Lan v Law Wai Chuen [1997] 1 HKC 1, followed by Lugar-Mawson J in HKSAR v Lau San Ching & Others [2004] HKLRD 683, namely that as the English text came into existence earlier, it should take precedence over the Chinese text.

The Respondent’s Argument

24.  Mr Ambrose Ho, SC relies on the dictionary meaning of “majority” and says it means over 50%.

25.  Mr Ho emphasizes that, in the context of the BMO – particularly s. 10 which governs the Third Schedule, “a majority”, when contrasting against “a majority of not less than 75%”, must mean more than 50%.

26.  Mr Ho points out the Chinese text of paragraph 3(4) of the Third Schedule namely, “贊成和反對雙方…相同” (zanzheng he fandui shuangfang… xiangtong) – literally meaning “the agreeing and opposing two parties… equal” (If there is an equality of votes …).

27.  He also points out the reference to “shuangfang” (雙方) (two parties) in paragraph 10(3) of the Second Schedule and paragraph 6 of the Eighth Schedule in connection with the procedure for meeting of management committee and of owners’ committee.

28.  Mr Ho argues that the reference to “shuangfang” (雙方) (two parties) indicates that it only envisages a “2-way” vote, one agrees “贊成” (zanzheng) and the other opposes “反對” (fandui); hence the term “多數” (duoshu) (the majority) in the context of paragraph 3(3) of the Third Schedule only intends to cover “the greater number” in a “2-way” vote, which in turn must mean more than half.

29.  Mr Ho suggests that even in a situation involving more than 2 options, other options should be eliminated first so that ultimately the owners can vote on the remaining 2 options and the winning majority must be more than 50% of the votes.

30.  Mr Ho suggests that the procedure to reduce the number of options to two to decide the ultimate majority can be dealt with by the corporation under paragraph 7 of the Third Schedule as a procedural matter.

31.  Mr Ho invites us to take into consideration the object of     the BMO, which he says is to “ensure that any decision taken receives the maximum or greatest consensus amongst the owners in order to promote harmony among neighbours and in turn facilitate implementation of any decision passed”. In the circumstances, securing a majority of more than 50% of the cast votes in order to pass any resolution in the owners’ meeting is necessary.

32.  Mr Ho suggests that whatever method of interpretation is to be adopted, “majority” in the context of the BMO means a majority of more than 50%.

Discussion

33.  “Majority” – a simple word, ordinarily means more than half. This is borne out by the repeated and consistent dictionary meaning of “a number which is more than half the whole number”, “the number greater than half of any total”.

34.  Very often, if not most of the times, a decision involves the choice of one out of two options – those who favour and those who disapprove a proposition, in which event, “a greater number” that supports or objects the proposition, is of course the majority. This perhaps explains why “majority” is also defined as “the greater number or part”. However, in such context, “a greater number” is more than 50%.

35.  When used technically, the meaning of “majority” or “majority vote” is clearer.

36.  Black’s Law Dictionary (6^th Edition) defines “majority vote” as “vote by more than half of voters for candidate or other matter on ballot. When there are only two candidates, he who receives the greater number of the votes cast is said to have a majority; when there are more than two competitors for the same office, the person who receives the greatest number of votes has a plurality, but he has not a majority unless he receives a greater number of votes than those cast for all his competitors combined”.

37.  In the 7^th Edition of Black’s Law Dictionary, “majority” is also defined as “a number that is more than half of a total; a group of more than 50%”. “Absolute majority”, and “simple majority” are further defined respectively as “a majority of all those who are entitled to vote in a particular election, whether or not they actually cast ballots”, and “a majority of those who actually vote in a particular election”.

38.  This perhaps also explains why a governing party, with most seats but still less than half of the total, is referred to as “minority government”.

39.  Mr Dykes, assisted by his junior Mr Ivan Wong, has referred us to a large number of Hong Kong ordinances containing the term “majority”.

40.  In the Chinese texts of those ordinances, “majority”, is referred to sometimes as “多數” (duoshu) (a greater number) and sometimes as “過半數” (guo banshu) (more than half).

41.  However, we are not persuaded that in the contexts of those ordinance, “多數” (duoshu) and “過半數” (guo banshu) should be construed differently.

42.  Quite apart from the ordinary meaning of “majority”, the ordinances referred to by Mr Dykes containing “多數” (duoshu) as its Chinese counterpart of “majority” very often provide a casting vote for the presiding member of the meeting in case of equality of votes.

43.  If it is necessary to choose one out of three or more options, it is unlikely that the presiding member of the meeting would be given a casting vote.

44.  There are a lot of ordinances, particularly those enacted or amended more recently, with “過半數” (guo banshu) (more than half) as their Chinese counterparts of “majority”.

45.  The only “jokers in the pack” where “majority” or “多數” could mean less than 50% are the election legislations.

46.  The Legislative Council Ordinance, Cap 542 refers to “absolute majority” “絕對多數” (juedui duoshu) to indicate a majority of more than 50% [s 50(4)] and “simple or relative majority” “簡單或相對多數” (jiandan huo xiandui duoshu) to indicate the winning majority of less than 50% [s 51(2)].

47.  In Schedule 5 of the District Council Ordinance, Cap 547, “an absolute majority” “絕對多數” (juedui duoshu) is used to describe “more than half”; and in s 41(2), “simple or relative majority” “簡單或相對多數” (jiandan huo xiandui duoshu) is used to describe the voting system which allows a winning majority of less than 50%.

48.  Similarly in The Village Representative Election Ordinance, Cap 576, “simple or relative majority” “簡單或相對多數” (jiandan huo xiandui duoshu) is used to describe the voting system which allows a winning majority of less than 50%.

49.  However, emphasis is invariably laid in all these election legislations that the relevant voting system adopted is “first past the post voting system” (see s 51(2) Cap 542, s 41(1) Cap 547 and s 31(3) Cap 576).

50.  The need for such emphasis is obvious. The reference to “majority” in the election legislations should be understood as being different from its ordinary meaning of “more than half”. “Majority of less than 50%” is only to be applied to the “first past the post voting system” used in the election legislations.

51.  In our view, unless otherwise clearly spelt out, as in the election legislations, “多數” (duoshu) and “過半數” (guo banshu) are synonyms to describe “a majority” or “a simple majority” of more than half.

52.  Mr Dykes’s list of authorities includes “現代漢語常用詞用法詞典” (the Modern Dictionary on the Usage of Frequently Used Chinese Phrases” where “多數”(duoshu) is defined as “較大的數量” (jiao da de shuliang) (a greater number or quantity).

53.  Presumably Mr Dykes seeks to argue that “多數” (duoshu), just as “a greater number”, need not be more than half.

54.  It is interesting to note the examples used in the Chinese dictionary to demonstrate the meaning of “多數” (duoshu) (a greater number of quantity), namely:

“班上共有十五個學生，多數是男生。/他們多數是北方人。/我們是多數，他們是少數。/擁護改革的佔絕大多數。/多數同志認爲，這次考題出得不錯。

55.  The following is a brief translation of those examples.

“There are 15 students in the class, ‘a greater part’ are boys; ‘a greater part’ of them are Northerners; we are ‘a greater part’, they are ‘a lesser part’; those who support the reform are ‘the (absolute) greater part’; ‘a greater part’ of the comrades consider the questions  well set.”

56.  These examples clearly demonstrate that “多數”（duoshu） (a greater part or quantity) is used in connection with a choice of one out of two options: (boys-girls；Northerners-Southerners; we-they; supporters - opposers; yes - no”. In those situations, “a greater part or quantity” must necessarily mean more than half.

57.  We are of the view that “多數” (duoshu), just as its English counterpart – “a greater part”, itself can be ambiguous. However, the ambiguity arises when there are more than two options. If the term were used in connection with a choice of one out of two options, “duoshu” or “a greater part” would be adequate to describe more than half.  

58.  Properly understood, both “多數” and “a greater part”, in their ordinary usage, mean more than half. “Majority” or “simple majority” should also be construed accordingly.

59.  Mr Dykes emphasizes that the matters, as opposed to resolutions, envisaged in the Third Schedule can involve three or more options and hence “majority” “多數”(duoshu) must be construed to mean the option that obtains the greatest number of votes, whether that number exceeds one-half or not.

60.  Even so, we believe “majority” and “多數”(duoshu) should be given their ordinary meanings, namely more than 50%. This is a matter of plain construction.

61.  Although the provisions of the BMO in both languages are predicated on a “2-way vote”, e.g. “雙方” (shuangfang) “two parties” in paragraph 10(3) of the Second Schedule, paragraph 6 of the Eighth Schedule and paragraph 3(4) of the Third Schedule, we do not believe paragraph 3(3) of the Third Schedule of the BMO requires any decision to be made by a “2-way vote”. The owners or the corporation can, if desired, determine any matter by a “2-way vote” and they can arrive at a “2-way vote” by progressive elimination, short-listing etc. These are procedure matters and can be determined in accordance with paragraph 7 of the Third Schedule or by the owners at meetings. Hence, if plan 3 had received more than half of the votes, we believe the decision would have complied with paragraph 3(3) of the Third Schedule of the BMO, although the members were asked to choose one amongst three options.

62.  Whilst we are not too impressed with the suggestion that the intention of the BMO is to ensure the maximum or greatest consensus amongst the owners when the required quorum for a meeting of the corporation is just 10% of the owners under paragraph 5(1)(b) of the Third Schedule, it will certainly be desirable that any decision reached at such meeting will at least be supported by more than 50% of those who appear in person or by proxy. After all it is a decision that binds all the owners.

63.  In our views, there is no inconsistency between Clause k of the Fourth Schedule to the DMC and the Third Schedule to the BMO. “Simple majority” and “majority” both mean a majority of over 50%.

Conclusion

64.  We are of the view that decision to accept the 438 votes, as the majority of votes, was inconsistent with Clause k of the Fourth Schedule of the DMC and paragraph 3(3) of the Third Schedule. The resolution to adopt plan 3 was therefore invalid and was not binding on the respondent.

65.  The judge’s decision was a correct one.

66.  We therefore dismiss the appeal with costs to be taxed if not agreed.