FUNG YUET HING v. THE INCORPORATED OWNERS OF HING WONG MANSION AND OTHERS

LDBM 367/2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 367 OF 2004

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JUDGMENT

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Background

1.  The Applicant is the owner of Flat No.2 Fuk Chak Street, 5^th Floor, Hing Wong Mansion, Kowloon, Hong Kong (“the Building”). The 1^st Respondent is the owners’ corporation of the Building.  The 2^nd and 3^rd Respondents are respectively the chairman and the secretary of the 1^st Respondent’s management committee (“the Management Committee”).

2.  On 15 September 2003, the Building Authority issued two orders (“the Orders”) to the 1^st Respondent requiring various renovation works (“the Required Works”) to be carried out in respect of the common parts of the Building.

3.  On 14 August 2004, a general meeting of the 1^st Respondent (“the 1^st Meeting”) was held for the purpose of appointing a contractor to carry out the Required Works.  The owners of the Building were asked at the 1^st Meeting to select one contractor out of a list of three contractors proposed by the Management Committee.  One of the proposed contractors was Golden Rise (HK) Construction Limited (“Golden Rise”).

4.  The Applicant contends flat at the 1^st Meeting, there were 123 owners present in person or by proxy.  There were 46 votes in favour of appointing Golden Rise as the contractor to carry out the Required Works. There were also 73 votes against all of the three proposed contractors and requesting for a fresh tender, the reason being that the invitation to tender issued by the Management Committee did not disclose sufficient details of the renovation works to be undertaken and included items of work not required by the Orders (“the Renovation Works”).

5.  The Applicant also contends that at the 1^st meeting, the 2^nd Respondent, who acted as chairman of the meeting, refused the Applicant’s request to inspect and verify the proxies held by the 2^nd Respondent for the purpose of voting at the 1^st Meeting.

6.  By a letter dated 27 August 2004, not less than 5% of the owners of the Building, including the Applicant, requested the 2^nd Respondent to convene a general meeting within 14 days for the purpose of appointing an administrator and dissolving the management committee, as well as passing resolutions to approve the items of the Required Works and to appoint a contractor to undertake the Required Works (“the Request”).

7.  The Applicant contends that the 2^nd Respondent has failed to comply with the Request to convene a general meeting within 14 days.

8.  A notice of meeting dated 8 September 2004 was then issued by the 2^nd Respondent to the owners of the Building, stating that a general meeting would be held on 25 September 2004 to approve 12 separate items of the Renovation Works and to appoint a contractor for such purpose.  A general meeting was indeed held on 25 September 2004 (“the 2^nd Meeting”) in accordance with the said notice, but the issues raised in the Request were not included in the agenda of the 2^nd Meeting.

9.  The Applicant contends that at the 2^nd Meeting, the 2^nd Respondent only asked the owners of the Building to select one contractor out of a list of 16 contractors, including Golden Rise, and there was never any discussion about the items of the Renovation Works.  Nonetheless, the owners were asked to approve a list of 12 items of the Renovation Works. There were 129 owners present in person or by proxy, 58 votes in favour of appointing Golden Rise as the contractor and 61 votes against all of the 16 proposed contractors.  These 61 owners requested for a fresh tender by reason that the invitation to tender issued by the Management Committee did not disclose sufficient details of the Renovation Works which were not required by the Orders.  They either voted against part of the 12 proposed items of the Renovation Works or did not cast their votes in respect of the Renovation Works.

10.  The Applicants also contends that at the 2^nd Meeting, the majority of owners present orally notified the 2^nd Respondent and other members of the Management Committee that all of the proposed contractors were unacceptable and the 12 proposed items of the Renovation Works were excessive in that not all of them were expressly required by the Orders and therefore need not be undertaken.

11.  The Applicant further contends that the 2^nd Respondent, who acted as chairman of the 2^nd Meeting, refused the Applicant’s request to inspect and verify the proxies held by the 2^nd Respondent for the purpose of voting at the 2^nd Meeting, and that the 2^nd Respondent wrongly announced at the 2^nd Meeting that the following resolutions were passed:-

(1)  The renovation works to the common parts of the Building shall be carried out by Golden Rise as the approved contractor; and

(2) The 12 items of renovation works proposed were approved and shall be undertaken by Golden Rise.

12.  By a letter dated 15 November 2004 from the 1^st Respondent’s solicitors to all the owners of the Building, the 1^st Respondent stated that the Renovation Works shall be carried out by Golden Rise as approved by the owners at the 2^nd Meeting at a cost of $4,286,000, and requested the owners to make their respective contributions in accordance with their obligations under the Deed of Mutual Covenant of the Building (“the DMC”).

13.  On 19 November 2004, the 1^st Respondent entered into a contract with Golden Rise for the Required Works and the Renovation Works (“the Renovation Contract”).  The Renovation Contract was signed by the 2^nd Respondent on behalf of the 1^st Respondent.

14.  The Applicant’s case is that the 1^st Respondent and members of the Management Committee, including the 2^nd Respondent, have no actual authority to enter into any contract, including the Renovation Contract, with Golden Rise and have no authority to request contributions from the owners, since the required approval from a majority of owners at general meeting had not been properly obtained.

15.  As to the 3^rd Respondent, the Applicant’s case is that the 3^rd Respondent has, in breach of paragraph 6(3) of the Third Schedule to the Building Management Ordinance, Cap.344 (“the BMO”), failed to display certified copies of the minutes of the 1^st Meeting and the 2^nd Meeting in a prominent place in the Building within 28 days of the dates of the 1^st and 2^nd Meeting.

16.  The Applicant therefore claims for the following reliefs:-

(1)	An order compelling the 2nd Respondent to convene a general meeting of the 1st Respondent to discuss matters set out in the Request;
(2)	An order compelling the 3rd Respondent to display certified copies of the minutes of the 1st Meeting and the 2nd Meeting in a prominent place in the Building;
(3)	A declaration that all resolutions passed (if any) at the 1st Meeting and the 2nd Meeting in relation to the carrying out of renovation works to the common parts of the Building (including but not limited to the appointment of Golden Rise as the approved contractor in respect of such renovation works, and the approval of the various items of renovation works to be carried out) are void and of no legal effect;
(4)	A declaration that the 1st Respondent and the Management Committee (including the 2nd Respondent) have no actual authority to enter into the Renovation Contract without a valid resolution passed at a duly convened meeting of the 1st Respondent in respect thereof;
(5)	A declaration that the Applicant is not liable to make any contribution to the 1st Respondent in respect of the Renovation Contract;
(6)	Such further consequential or other assessments, accounts or inquiries as may be necessary;
(7)	Costs; and
(8)	Further and/or other relief

The issues

17.  The Respondents’ pleaded defences, as stated in the Amended Notice of Opposition and the Further and Better Particulars, are essentially as follows:-

(1)	At the 1st Meeting, there were 46 votes selected the tender submitted by Golden Rise, and no owner selected the tenders submitted by the other 2 contractors.
(2)	At the 2nd Meeting, there were 58 votes selected the tender submitted by Golden Rise in respect of the Required Works as well as the Renovation Works, and no owner selected the tenders submitted by the other contractors.  The Respondents also contend that there were 61 votes amounting to votes of renouncement because the owners purportedly declined and /or failed to select any tenders and refused and/or failed to indicate their approval or disapproval on the Renovation Works and such votes were also invalid on the ground that the voting forms were not properly filled up.
(3)	The 1st Respondent had authority to appoint Golden Rise to undertake the Required Works and the Renovation Works
(4)	The Request was not a valid notice pursuant to paragraph 1(2) of the Third Schedule to the BMO because of the following matters:-
	(a)  The cover letter of the Request was not signed but merely accompanied with 3 pages of signatures of persons claiming to be owners;
	(b) It was not proved or shown that the persons signing agreed to make the Request;
	(c) It was not proved or shown that the persons signing the Request were owners of the Building; and
	(d) Some of the signatures were not valid as some owners signing were in fact co-owners with other persons and a single signature from one of the co-owners would not be a valid signature.
(5)	Although the minutes of the 1st and 2nd Meetings had not been displayed within 28 days as required by the BMO, they were nonetheless displayed in April 2005 and early 2005 respectively.

18.  At the trial, the Respondents raised two more matters as follows:-

(1) There was in fact no resolution passed at the 1^st Meeting; and

(2) The minutes of the 1^st and 2^nd Meetings were disclosed during the trial, and hence it is no long necessary to display them in the Building.

19.  I think there are basically 4 main issues in this case.  They are:

(1) Whether any valid resolution had been passed at the 1^st and 2^nd Meetings;

(2) Whether the 1^st Respondent had actual authority to enter into the Renovation Contract with Golden Rise and to call for contributions from the owners;

(3) Whether the Request was a valid request; and

(4) Whether the 3^rd Respondent was in breach of paragraph 6(3) of the Third Schedule to the BMO.

Any valid resolution passed

20.  In relation to the 1^st Meeting, the Respondents contend that there was in fact no resolution passed at the meeting.  The 2^nd Respondent gave evidence that the votes were counted but no resolution was announced.  The 2^nd Respondent also confirmed that there was no announcement made as to any invalid votes.  On the other hand, the Applicant and her witnesses, Mr Wan Cho Hei and Ms Li Yip Fu gave evidence that at the 1^st Meeting, the results of the voting were in fact announced by the representatives of the management company.  It was announced: “46 votes chose Golden Rise, 73 votes rejected all 3 contractors”.

21.  Nevertheless, according to the minutes of the 1^st Meeting, there was no resolution passed at the 1^st Meeting at all.  The minutes stated that the owners at the meeting accepted the chairman’s suggestion to convene another meeting so that all tenders would be put up for the owners to choose.

22.  Since the 2^nd Meeting was in fact held for the owners to choose a contractor from all the tenders, I accept that the contents of the minutes of the 1^st Meeting do represent what transpired at the 1^st Meeting, i.e. there was no decision made yet as to who would be the contractor.  In other words, there was no resolution passed at the 1^st Meeting, even though the voting results were announced.

23.  The Applicant in fact does not wish to rely on any resolution passed at the 1^st Meeting, but rather wants to declare such resolution (if any) void and of no legal effect.  If there had been resolution passed based on the result announced, the resolution would be to reject all 3 contractors.  I see no reason why the Applicant would want such a resolution to be declared void, as the resolution would in fact be in her favour.

24.  Since the Respondents do not contest that there was any resolution passed at the 1^st Meeting and in view of my finding that there was in fact no resolution passed at the 1^st Meeting, it is not necessary for me to make any declaration in respect of the 1^st Meeting at all.

25.  As to the 2^nd Meeting, there were many allegations made by the Applicant in relation to the manner the 2^nd Meeting was conducted.  However, the grounds relied upon by the Applicant to seek for a declaration that the resolutions passed at the 2^nd Meeting are void and of no legal effect are confined to whether there were majority votes to appoint Golden Rise as the contractor and to carry out the 12 items of the Renovation Works.

26.  It is therefore unnecessary for me to deal with the other allegations concerning the manner in which the 2^nd Meeting was conducted, save that whether there were majority votes to pass the resolutions.

27.  From the voting forms produced at the trial, the votes received at the 2^nd Meeting were as follows:-

(1) For choosing the contractor, 58 voting papers chose Golden Rise, 16 voting papers with the identity of ‘flat unit’ stated that no contractor should be chosen and 45 voting papers without the identity of ‘flat unit’ stated that no contractor should be chosen.

(2)  For the Renovation Works, 57 voting papers voted for all items of the Renovation Works, 1 voting paper voted for 3 items of the Renovation Works, 1 voting paper with the identity of ‘flat unit’ voted against all items of the Renovation Works, 4 voting papers without the identify of ‘flat unit’ voted against all item of the Renovation Works, 2 voting papers with the identity of ‘flat unit’ did not vote for or against any item of the Renovation Works and 53 were blank voting papers.

28.  The Respondents submit that those voting papers without the identity of ‘flat unit’ should be invalid because at common law, the Management Committee should be entitled to know how owners voted, so that the validity of the votes could be scrutinized: Haarhaus & Co GmbH v. Law Debenture Trust Corp plc and others [1988] BCLC 640.

29.  The Respondents also rely on the case of Chan Tze Pang & ors. v. Incorporated Owners of Hing Wong Mansion and anor., LDBM 187 of 2002 to submit that the identity of ‘flat unit’ was essential for one to find out any irregularity of votes.

30.  I have no doubt that the Management Committee is entitled to know the identity of ‘flat unit’, but the point is whether it has exercised such right and requested the owners to state their flat units in the voting forms.

31.  The evidence of the Applicant and her witnesses is that no instructions whatsoever were given to owners at the 2^nd Meeting as to how to fill in the voting forms.  The 2^nd Respondent also admitted in his evidence that it was never announced at the 2^nd Meeting that owners had to fill in their flat units in order that their votes would be counted as valid.  Such requirement had never been expressly imposed by the 1^st Respondent or the Management Committee.  Indeed, at the 1^st Meeting, there were also 5 votes without the identity of ‘flat unit’ being counted and no announcement was made that such votes were invalid.  Similarly, at the 2^nd Meeting, there was also no announcement made that these votes were invalid, the 2^nd Respondent was aware at that time that many voting papers were without the identity of ‘flat unit’.

32.  Even when the printed voting forms had a space for the owners to fill in the flat units and the 2^nd Respondent had requested the owners to fill up the voting forms carefully, I do not think that such a stringent requirement should be imposed on the owners when there was no express and clear request or warning given to the owners that they had to fill in the flat units or else the votes would become invalid.

33.  The Respondents also cannot rely on previous practice or custom to say that the owners should know the requirement of filling in the identity of ‘flat unit’, as there may be new owners who just bought the flat before the 2^nd Meeting, or owners who attend such a meeting for the first time.

34.  In the circumstance, I do not find that the omission of the identity of ‘flat unit’ in the voting papers would render any of the voting forms invalid as suggested by the Respondents.

35.  As to the blank forms, the Respondents submit that they should amount to abstention and should not be counted at a simple majority note.   The Respondents rely on Robert’s Rules of Order, newly revised, pp. 387, 394 & 401 to make this submission.

36.  In relation to the voting form for choosing contractor, there is no blank form as such, because all 61 votes clearly crossed out all the tenders, I think the cross in each of these voting forms is a clear and express indication of rejection of all tenders.   So these 61 notes cannot be regarded as abstentions or “renouncement” as alleged by the Respondents in the Amended Notice of Application.

37.  As to the voting form for the Renovation Works, the evidence from the Applicant is that those who did not indicate their approval to any of the items thought they were not required to vote at all or were otherwise mistaken that a rejection of all the tenders means implied rejection of all the items of the Renovation Works.  There is no dispute that the two voting forms were stapled together and counted together.  The Applicant’s evidence also suggests that the owners were simply not in a position to vote given the inadequacy of information provided and the lack of answers to their questions.

38.  Although there is evidence to suggest that the Applicant filled in some of the forms for other owners, the evidence does not go so far as to say that all the other voting forms were filled in by the Applicant.  I do not think that the Applicant and her witnesses can really give evidence on behalf of all the owners as to why the voting forms were left blank.  So I do not find that the blank forms are all caused by the reasons advanced by the Applicant. Even if all the forms were left blank because of the mistaken belief of the owners, I think they are still invalid forms because an owner’s own mistake cannot validate an otherwise invalid form.  Thus, I find that the blank forms are invalid forms.

39.  With the above findings, the voting result is therefore as follows:-

(1) For choosing the contractor, 58 votes for choosing Golden Rise, 61 votes against all contractors.

(2) For the Renovation Works, 57 votes for all items of the Renovation Works, 1 vote for 3 items of the Renovation Works, 5 votes against all items of the Renovation Works and 55 were invalid votes.

40.  Then the crucial question is whether these votes support the Respondents’ contention that the resolutions were passed by majority. Paragraph 3(3) of the Third Schedule to the BMO stipulates that:-

“… all matters arising at a meeting of the corporation at which a quorum is present shall be decided by a majority of votes of the owners.”

41.  Clause 18(f) of the DMC, on the other hand, provides that:-

”Resolutions shall be passed by a simple majority and shall be binding on the parties hereto.”

42.  However, paragraph 8 of the Third Schedule to the BMO states 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.”

43.  It follows that I only need to look at paragraph 3(3) of the Third Schedule to the BMO and interpret this provision to find out what majority of votes is required.

44.  In fact, in The Incorporated Owners of Tsuen Wan Garden v. Prime Light Limited, CACV 1/2004, the Court of Appeal has already indicated that:-

“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.”

45.  The Respondents do not agree with the Court of Appeal’s interpretation as aforesaid and contend that the aforesaid passage in the Judgment of the Court of Appeal is only obiter and not binding on this Tribunal.   

46.  Referring to the facts of the Tsuen Wan Garden case, the Respondents contend that the ratio in that case is that a motion or option (i.e. plan 3) requires more than half of the votes, i.e. more than half of the “998 shares of votes” instead of more than half of the “1024 shares present in person or by proxy”, so as to be passed in compliance with paragraph 3(3) of the Third Schedule to the BMO.  The above passage has made in the context of discussing whether the BMO intents to ensure the maximum or greatest consensus amongst the owners.

47.  The Respondents also contend that in the Tsuen Wan Garden case, there was no vote of abstention or any invalid vote among the 998 shares of votes cast.  The Court of Appeal has never referred to or taken account the 26 shares present in person or by proxy but cast no vote.  Indeed, paragraph 3(3) of the Third Schedule to the BMO merely refers to majority of “votes” of the owners, not majority of “owners present”.

48.  The Respondents therefore submit that the legislature does not intend the majority take into account the number of owners who are present at a meeting but elect not to or fail to vote.

49.  I do not agree with the Respondents in this regard.  I think the Court of Appeal has made it very clear that the decision must be supported by more than 50% of those who appear in person or by proxy.  There is no qualification that “ those who appear in person or by proxy” must have voted. The Court of Appeal has given its reasons for such observation, that is, “it is a decision that binds all the owners.”  So there is no reason to suggest that the Court of Appeal would ignore those who are present in person or by proxy but do not vote.

50.  The Respondents’ contention that abstentions ought not be taken into account would in fact give rise to undesirable consequences.  For example, if there were 100 owners present at the meeting and only 1 owner voted in favour of a resolution, the other 99 owners abstained or failed to vote, can this resolution be said to be passed by the majority of votes of the owners?  My answer is definitely no.  I think the legislature would not intend such consequence to occur either.  

51. The Respondents further contend that unless otherwise provided, a “majority” or a “simple majority” shall mean a majority of those actually voting.  The Respondents rely on the following passages in some of the textbooks:-

(1) “When a motion is put to a meeting a person present may take one of the three courses.  He or she may vote for or against it, or may abstain from voting at all.  A person who is present and abstains may affect the result where, for a motion to be passed, there is required to be cast in its favour a proportion of the votes of those present. It is otherwise where the proportion is of those voting.” (The Conduct of Meeting, Mandy Burton, 23^rd ed., p.32)

(2) “Unless otherwise stated, “majority” means a majority of those actually voting either “yes” or “no” (a phase sometimes need in this context is “present and voting”).  The term does not refer to:

(1) a majority of the quorum (provided that, in the case of a meeting, a quorum is present);

(2) a majority of those present (which might include abstainers);

(3) a majority of the total membership.

If concepts such as these are desired, then they must be explicitly spelt out in the organisation’s constitution.” (Guide for Meetings and Organisations, N E Renton, 7^th ed. volume 2, para. 12.101)

(3) “Majority is a term signifying the greater member.  In legislative and deliberative assemblies, it is usual to decide questions by a majority of those present and voting.  This is sometimes expressed as a “simple” majority, which means that a motion is carried by the mere fact that more votes are cast for than against, as distinct from a “special” majority where the size of the majority is critical.” (Shackleton on the Law and Practice of Meetings, Ian Sherman, 9^th ed. Para. 7-27) (See also para. 14.15 of Horsley’s Meetings, 4^th ed., AD Lang)

52. However, I do not find these passages in the textbooks helpful as they are only the views of the authors and it is ultimately a matter of looking back at the particular provision to see what the legislature intends it to mean.

53.  There is also no persuasive authority for the Respondents’ contention that a “simple majority” does not require abstentions or invalid votes to be counted.  On the contrary, in para. 14.15 of Horsley’s Meetings Procedure, Law and Practice, 4^th ed., A.D. Lang, the author states that:-

“It would be rare for a rule to be so imprecise as to state merely ‘a majority’ but in such a case it appears that this requires a majority of those present who are entitled to vote….”

54.  In Joske’s Law & Procedure of Meetings in Australia, 9^th ed, p.74, the author, referring to the case of Labouchere v. Earl of Wharncliffe (1879) 13 Ch D 346, states that:-

“So where a single majority of those present was necessary and, of the 35 present, 16 voted for the motion and eight against it, while 11 did not vote at all, the motion was lost…. Unless a particular majority is prescribed, for example, a majority of those present, the majority means the majority of those who choose to take part in the proceedings of the meeting….”

55.  From the above, it is clear to me that even a simple majority can require abstentions to be counted.  In fact, in Labouchere v. Earl of Wharncliffe, supra., Jessel MR said at p. 354 that:-

“when a resolution is put to a meeting, the persons present may take one of these courses. They may vote for or against it, or, not wishing to express a positive opinion on the question, refrain from voting at all.  This being so, those who do not vote may, by not doing so, turn the scale in favour of the accused member of the club.”

56.  Although Jessel MR made the observation because the resolution must be adopted by a special or a specified majority, I see no reason at all to exclude abstention in the case of “simple’ majority.  It is only logical to count the abstention both in the case of “special” majority and in the case of “simple” majority.

57.  In the circumstances, I find that the phrase “a majority of votes of the owners in paragraph 3(3) of the Third Schedule to the BMO actually refers to “more than 50% of the owners who appear in person or by proxy.”

58.  Since there were 129 owners present in person or by proxy at the 2^nd Meeting, the number of votes required to pass any resolution is at least 65.  For the two resolutions passed at the 2^nd Meeting, there were only 58 and 57 votes respectively in support of the resolutions.  So there were no majority votes in support of the resolutions and hence the resolutions passed must be invalid.

Actual authority to enter into the Renovation Contract and call for contributions

59. The Respondents rely on section 18 of the BMO to say that the 1^st Respondent has actual authority to enter into the Renovation Contract and by virtue of section 29 of the BMO, such authority may be exercised by the Management Committee on behalf of the 1^st Respondent.

60. However, as held in the case of Equal Property Management Limited v. Incorporated Owners of San Po Kong Mansions, DCCJ 14835/2000, the highest authority of decision-making of a corporation is vested in the general meeting of owners, and next in the management committee.  If the owners in the general meeting do not approve a resolution, the corporation and the management committee will not have the authority to carry out that resolution.  The management committee cannot overrule a decision of the owners in the general meeting.  In our present case, since the resolutions to appoint Golden Rise as the contractor and to carry out the Renovation Works were not validly passed at the 2^nd Meeting, the 1^st Respondent and the Management Committee would not have the authority to enter into the Renovation Contract.

61. When the 1^st Respondent and the Management Committee have no authority to enter into the Renovation Contract, it follows that they cannot call for contributions from the owners in respect of the Renovation Contract. Even though sections 21 and 22 of the BMO empower the 1^st Respondent and the Management Committee to call for contributions from the owners, they are not entitled to exercise such power when no valid resolutions have been passed to approve the Renovation Works as well as the Renovation Contract.

62. Moreover, as the Respondents did not provide any contrary evidence, I accept the evidence of the Applicant and her witnesses that the following items of the Renovation Works were not necessary to maintain the common parts of the Building in a state of good and serviceable repair and clean condition:-

(1)  Items 4, 5 and 6: The water pipes are working well and no replacement is necessary.

(2)  Item 8: The metal railings are in a good state of repair and no rust is evident.  Any improvement work will only be for aesthetic purposes.

(3)  Items 9 and 10: The essential and necessary works in relation to the walls are already covered under item 2 of the Required Works.  The other works are for aesthetic purposes.

(4)  Item 11: The roof is owned by Kiu Fung Investment Company and the cost of repair should not be borne by all the owners.

(5)  Item 12: again the works are for aesthetic purposes.

63. The 1^st Respondent and the Management Committee will not have power under section 18 of the BMO to carry out the aforesaid works that are not necessary to maintain the Building in a state of good and serviceable repair and clean condition.

64. I do not therefore find that the 1^st Respondent and the Management Committee have any actual authority to enter into the Renovation Contract with Golden Rise or to call for contributions from the owners of the Building including the Applicant in relation the Renovation Contract.

Whether the Request was a valid request

65. The 2^nd Respondent admitted in his evidence that he had received the Request (Exhibit “R7”), but did not convene a meeting pursuant to the Request.  The 2^nd Respondent, however, contends that the Request does not amount to a request as defined by paragraph 1(2) of the Third Schedule to the BMO because it was not made by no less than 5% of the owners of the Building.  The 1^st page of the Request was separate from the rest of the Request and did not contain 26 signatures.  It was not even signed by anyone.  There is no evidence that the owners put their signatures in the List of Owners in Exhibit R7 for the purpose of making a request to convene a general meeting.  There were only valid signatures of 12 owners only as not all co-owners had jointly signed the List of Owners.

66. It is argued by the Respondents that the case of Wu Kwai Yung v. Wong Hong Ming, LDBM 323/2002 was wrongly decided as a co-owner may alone rent out the co-owned property and recover possession of the same because of his right of possession rather instead of his ownership in the same.  Even one who merely has possessory title of land may rent out property as well as recover possession thereof: Bruton v. London and Quadrant Housing Trust [1999] 3 All ER 481 and Industrial Properties (Burton Hill) Ltd. v. Associated Electrical Industries Ltd. [1977] QB 580.

67. The Respondents also argue that there is no clear or express provision in the BMO to give the power to a co-owner to act on behalf of the other co-owners and if a co-owner is permitted to act on behalf of other co-owners to make a request under paragraph 1(2) of the Third Schedule to the BMO, it may end up that even less than 5% of owners can request the chairman to convene a meeting.

68. I totally reject the Respondents’ submissions in this regard.  I accept the evidence of the Applicant and her witnesses that all the owners who signed on the List of Owners were fully aware that the signatures were collected for the purpose of requesting the chairman to convene a general meeting.  I do not think that the owners would blindly sign the List or the Applicant would trick the owners into signing the List.  There is absolutely no need for the Applicant to conceal the purpose at all.  The Respondents in fact has no contrary evidence to rebut the Applicant’s evidence in this regard.

69. The 2^nd Respondent gave evidence that the only reason why he refused to convene a meeting pursuant to the Request was because the names of two owners appeared twice on the Request and he thought it was unreasonable.  The 4 grounds stated by the Respondents in the Further and Better Particulars as aforesaid did not contribute to the 2^nd Respondent’s decision to refuse to convene a meeting.  The 2^nd Respondent also admitted that he did not take any steps to verify the signatures, nor did he seek any legal advice on the validity of the Request.  He simply did not think that it was necessary to respond to the Request.

70. In the case of Wu Kwai Yung, supra., which was adopted in Chan Yuen Bing v. Cheng Chi Hung, LDBM 242/2003, I have decided that once the chairman receives what appears prima facie to be requests from at least 5% of the owners, the burden falls on the chairman to prove that the requirements in paragraph 1(2) of the Third Schedule was not in fact satisfied, otherwise the chairman must convene the meeting within 14 days.  I still hold this view because this provision would not be otherwise workable at all.  It could not have been the intention of the legislature to permit the chairman to use an excuse to delay or refuse the holding of a meeting by a mere assertion that the signatures do not appear to be genuine.

71. The Respondents’ contention that the case of Wu Kwai Yung was wrongly decided is totally misconceived.  My decision in that case was not based on the landlord’s right at common law, but the interpretation of the provisions in the BMO.  Paragraph 3(5)(b)(iii) of the Third Schedule to the BMO gives a co-owner the right to vote at a meeting of the corporation even though the co-owner was not appointed by the other owners.  If a co-owner can vote alone, there is no reason why he cannot alone request the chairman to convene a meeting.  A co-owner is also an owner within the definition of “owner” in section 2 of the BMO.  As an owner, a co-owner alone should be able to request the chairman to convene a meeting just like any other owner, as long as the total number of owners is more than 5%.

72. Furthermore, the provisions in 5B, paragraph 9 of the Third Schedule and Schedule 11 of the BMO, as well as the decision in U Wai Investment Co Ltd v. Au Kok Tai & ors. [1997] 4 HKC 2000, states clearly how the percentage of owners are to be ascertained, I do not see how the Respondents can say that my interpretation would end up that even less than 5% of owners can request the chairman to convene a meeting.

73. I therefore do not find any merit in the Respondents’ contention.  There were clearly over 5% of the owners requesting the 2^nd Respondent to convene a meeting and the Request is a valid one.  The 2^nd Respondent has breached his duty under paragraph 1(2) of the Third Schedule to the BMO to convene a meeting as requested.

Displaying minutes

74. Paragraph 6(3) of the Third Schedule to the BMO requires the 3^rd Respondent as secretary of the Management Committee to display the minutes of the 1^st and 2^nd Meetings within 28 days from the date of the meeting.  It is not disputed that no such minutes were displayed within 28 days, but the Respondents contend that they were displayed in April 2005 and early 2005 respectively.  The evidence of the Applicant and her witnesses is that no such minutes had been displayed at all.

75. The 2^nd Respondent’s evidence in his supplemental witness statement is that the minutes of the 1^st and 2^nd Meeting were displayed in the lift lobbies of the Building as from 15 April 2005 and early April 2005 respectively.  However, in cross-examination, he admitted that he does not remember when such minutes were displayed and for how long they were displayed.  I find that such evidence is totally unreliable.  If the minutes were indeed displayed in April 2005, the matters should still be fresh in the 2^nd Respondent’s mind at the trial.  There is no reason why he could not the matters.  It is also very strange that the 3^rd Respondent did not give evidence in this regard.  I therefore reject the Respondents’ contention and find that no such minutes were ever displayed.

76. The contention that since the minutes were disclosed at the trial, it is no longer necessary to display them in the Building is totally unmeritorious.  The purpose of displaying the minutes at the Building is to let all the owners have the chance to read the minutes, not just the Applicant.  The duty to display them will not be fulfilled by just disclosing them at trial. 

77. In the premises, the 3^rd Respondent is clearly in breach of paragraph 6(3) of the Third Schedule to the BMO.

Conclusion

78. In view of my above findings, the Applicant is entitled to the reliefs claimed save that there should be no declaration in respect of the 1^st Meeting.

79. I therefore grant the following orders:-

(1)  The 2^nd Respondent do within 14 days from the date hereof convene a general meeting of the 1^st Respondent to discuss the matters set out in the Request;

(2)  The 3^rd Respondent do within 14 days from the date hereof display certified copies of the minutes of the 1^st and 2^nd Meetings in a prominent place in the Building;

(3)  All resolutions passed at the 2^nd Meeting in relation to the carrying out of renovation works to the common parts of the Building (including but not limited to the appointment of Golden Rise as the approved contractor in respect of such renovation works, and the approval of the various items of renovation works to be carried out) are hereby declared void and of no legal effect;

(4)  It is hereby declared that the 1^st Respondent and the Management Committee (including the 2^nd Respondent) have no actual authority to enter into the Renovation Contract without a valid resolution passed at a duly convened meeting of the 1^st Respondent in respect thereof;

(5)  It is hereby declared that the Applicant is not liable to make any contribution to the 1^st Respondent in respect of the Renovation Contract;

(6)  There be liberty to apply in relation to such further consequential or other assessments, accounts or inquiries as may be necessary; and

(7)  Costs order nisi: Save where there has been previous order for costs, the Respondents do pay the Applicant her costs of the application, including any costs reserved, with certificate for counsel to be taxed on District Court Scale if not agreed.  If there is no further application for costs within 14 days from the date hereof, the costs order nisi shall become absolute.