正好工業大廈業主立案法團 v. 傑迅有限公司 AND ANOTHER

LDBM 82/2021

[2025] HKLdT 39

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO 82 OF 2021

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J U D G M E N T

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INTRODUCTION

1.  This dispute concerns a refusal by some owners to contribute to the cost of works undertaken at a building, that they say were part of an unlawful scam for an inflated price.

2.  The Applicant is the Incorporated Owners (“IO”)  of Jing Ho Industrial Building (“Building”). The 8^th Respondent (“R8”)  and the 9^th Respondent (“R9”)  are the registered owners of Flats 7C, 7D, 15A, 15C, 20D, 22A and Car Park No. 48 at 2/F of the Building.

3.  The IO is represented by counsel Ms Samantha Lau. R8 and R9 are represented by their director Mr Young Tat Chiu Thomas (“Mr Young”)  in person.

PARTIES’ CASES

4.  The IO’s case as set out in its Form 29 Notice of Application and its Re-Re-Amended Reply is in summary:

(1)  All owners of the Building are bound by the terms of the Deed of Mutual Covenant (“DMC”)  of the Building.

(2)  On 26 July 2018, the Management Committee (“MC”)  of the IO resolved to conduct a tender exercise for the contemplated project (“Tender Exercise”)  by way of blind tender. Essentially, the MC expressly agreed that the tender documents of the project would not list the name of the Building, the address of the Building or the name of the consultant. The Tender Exercise would be handled by the IO’s solicitors.

(3)  On 19 August 2019, at an owners’ general meeting (“Meeting”)  owners resolved, inter alia, (1)  to appoint WHL Engineering Ltd (“Contractor”)  to renovate the specified common parts of the Building (“Project”); and (2)  for the costs of the Project to be contributed to by owners of the Building by 4 instalments (“Resolution”).

(4)  Clause 4(f)(iv)  of the DMC provides that owners shall bear and pay “the cost of repair, renewing, maintaining…the said building”. Section 22(2)  of the Building Management Ordinance (Cap. 344)  (“BMO”)  further provides that “the amount to be contributed by an owner” shall be fixed by the management committee “in accordance with the respective shares of the owners”.

(5)  The Project was completed in July 2020.

(6)  Pursuant to the DMC and BMO, R8 and R9 are liable to pay HK$437,484.80 and HK$720,563.20 respectively, being their share of the costs of the Project.

(7)  Despite repeated demands of the IO, R8 and R9 refused and continue to refuse to pay their share of the costs of the Project.  

5.  The IO commenced these proceedings seeking the following relief against R8 and R9:

(1)  Payment of all outstanding costs of the Project in the sum of HK$437,484.80 from R8 and HK$720,563.20 from R9 forthwith;

(2)  Payment of interest on the outstanding costs pursuant to Clause 4(i)  of the DMC;

(3)  Costs.

6.  R8 and R9 deny liability to contribute. Other owners had resisted payment and were respondents in these proceedings, but by the time of trial only R8 and R9 remained. They shall be referred to collectively as “the Respondents”. The Respondents have raised many and varied points in opposition to the claims. However, based on their Form 7 Re-Re-Amended Notice of Opposition (“NOO”), their defences may be summarised as follows:

(1)  The Project was the result of a price rigging exercise. The “renovation scammers” rigged the price of the Project and duped / defrauded the owners of the Building. The MC of the IO was “hijacked” or “involved in perpetration of these scams”. Owners, such as R8 and R9, should not be liable to pay for the Project on “good faith and moral grounds”.

(2)  The tender box to receive tenders for the Project was not placed in the Building, contrary to the Code of Practice on Procurement of Supplies, Goods and Services (“Code”). Therefore, the Tender Exercise contravened section 20A of the BMO. The contract of the Project (“Contract”)  is void or voidable. Alternatively, under section 20A(9)  of the BMO, the MC of the IO must be personally liable for the Contract.

7.  Based on the Respondents’ Closing Submissions (“Rs’ Closing”)  and their oral submissions, the Respondents’ defences may now be summarised as follows:

(1)  The Meeting of owners on 19 August 2019 was not validly convened. The resulting Resolution, is therefore not binding on the Respondents. The Resolution is void by reason of paragraph 3(7)  of Sch. 3 of the BMO.

(2)  The Tender Exercise of the Project failed to comply with section 20A of the BMO. The Respondents are therefore not liable to contribute to the costs of the Project.

(3)  The IO had been hijacked by a group of “scammers”. The Tender Exercise and the entire Project were a “false pretense” put up to induce owners of the Building to pay for the Project at an inflated price.

8.  Many of the points raised and relied upon by the Respondents are not set out in their NOO, which was not drafted by a legal representative. However, Ms Lau has endeavoured to assemble the various points, whether pleaded or not. The IO seeks to reply to each in turn and submits that even considering all matters now raised, the Respondents have no valid defences. In summary the IO replies:

(1)  In the absence of any supporting evidence, the Respondents have failed to prove that the Tender Exercise and/or the Project was a scam:

(i)  The Project had to be carried out to comply with relevant building orders. It was carried out in good faith to comply with the Building Ordinance.

(ii)  The MC adopted a blind tender to avoid the possibility of collusive bidding, not to facilitate that. The MC meeting record was duly displayed continuously for no less than 7 days in a conspicuous location in the Building, which ensured all owners would be aware of the decision. The procedure conforms with paragraph 10(4B)  of Sch. 2 of the BMO.

(iii)  All tender documents were prepared by an approved consulting firm, Joyance Building Consultant Company Ltd (“Consultant”). The information in the tender documents was sufficient to allow contractors to submit their prices.

(iv)  The Contract was signed following the Resolution properly passed by owners. The Resolution complies with paragraph 3(3)  of Sch. 3 of the BMO and is valid.

(v)  The IO has duly paid the Contractor the project costs of HK$22,388,888. In any event, whether the sum was paid has no bearing on R8 and R9’s liability to pay the repair costs.

(2)  Even if the Tender Exercise did not comply with section 20A of the BMO, section 20A(5)  of the BMO makes clear that the resulting contract “shall not be void by reason only that it does not comply with” section 20A(1).

(3)  Insofar as the Respondents seek to make the IO liable for the costs of the Project, it relies on section 29A of the BMO. Since the members of the MC acted in good faith and reasonably, they shall not be personally liable for any act done or default made by or on behalf of the IO.

JOINT LIST OF ISSUES

9.  On the first day of trial the Respondents made a contested application to amend the Joint List of Issues. Leave was granted to add one issue, namely Issue 1A. The Amended Joint List of Issues is thus:

	Issues
1.	Whether R8 and R9 are required under Clause 4(f)  and 4(h)  of the DMC of the Building to contribute to the costs of the Project?
1A.	Whether the owners’ meeting on 19 August 2019 was validly convened?
2.	Whether the tender exercise of the Project complies with section 20A of the BMO, Cap. 344?
3.	If not, does non-compliance with section 20A of the BMO negate the liability of R8 and R9 to contribute to the costs of the Project?
4.	Whether section 20A(9)  of the BMO negates the liability of R8 and R9 to contribute to the costs of the Project?
5.	Whether the IO “had been hijacked by a group of sky price bid rigging scammers, who use the IO machinery to perpetrate a fake, phoney purported tender exercise as a false pretense that it was genuine, to trick, dupe owners”?
6.	If so, how does that negate R8 and R9’s liability to contribute to the costs of the Project?
7.	What is the sum of contribution R8 and/or R9 are liable for?
8.	Whether R8 and R9 are liable for interest on the amount unpaid under Clause 4(i)  and (k)  of the DMC?
9.	If so, what is the amount of interest R8 and/or R9 are liable for?

WITNESSES

10.  At trial the IO and the Respondents each called one witness to give evidence. Their witness statements stood as their evidence in chief.

11.  The IO’s witness Mr Albert Yeung Kwok Fai (“Mr Yeung”)  is the property manager of the Building and authorised by the IO to give evidence on its behalf. He has been in charge of managing the Building since 21 November 2019. He claimed to have a deep understanding of the material matters. Mr Yeung adduced 2 witness statements: (1)  Witness Statement dated 14 March 2023; and (2)  Supplemental Witness Statement dated 18 November 2024.

12.  The Respondents’ witness was Mr Young Tat Chiu Thomas their representative, Mr Young who conducted their case throughout. He adduced 2 witness statements: (1)  Witness Statement dated 2 August 2023; and (2)  Supplemental Witness Statement dated 6 November 2024.

ANALYSIS AND DETERMINATION OF THE ISSUES

Issues 1, 1A and 7: R8 and R9’s liability under the DMC

13.  Issues 1, 1A and 7 concern the liability of R8 and R9 to pay repair costs under the DMC, and the extent, so are addressed together.

14.  The DMC of the Building was registered at the Land Registry on 24 October 1977. The DMC contains express provisions in respect of owners’ contribution towards maintenance costs of the Building.  

15.  Clause 4(f)(iv)  of the DMC provides that:

“Each owner shall be bound by and shall observe and perform the following covenants provisions and restrictions:-

(f)  The following costs charges and expenses shall be borne and paid by the owners of the said building in the same proportions as provided under sub-clause (b)  hereof namely: … (iv)  The costs of repairing, renewing, maintaining, cleansing, painting or decorating the said building or any part of parts thereof and all water pumps, tanks, pipes, sewers, drains, watercourse, cable, wires or services therein and all the apparatus equipment and conveniences thereof…”

16.  The DMC of the Building does not specify how each owners’ contribution towards repair costs should be calculated. Therefore, section 22(2)  of the BMO applies:

“If there is no deed of mutual covenant, or if the deed of mutual covenant does not provide for the fixing of contributions, the amount to be contributed by an owner towards the amount determined under section 21 shall be fixed by the management committee in accordance with the respective shares of the owners.”

17.  The Project concerns the repair and maintenance of common parts of the Building. Under Clause 4(f)  of the DMC, all owners, including R8 and R9, are obliged to contribute towards the costs of such Project. Pursuant to section 22(2)  of the BMO, each owner shall pay a sum that is proportionate to the respective undivided shares allotted to the owners of the Building.

18.  R8 and R9 have 17 and 28 ownership shares of the Building respectively. According to Schedule 2 of the DMC the Building is divided into 870 undivided shares. Since the total renovation costs of the Project are HK$22,388,888, R8 and R9 are liable to pay HK$437,484.80 and HK$720,563.20 respectively. The calculation of their share of the repair costs is as follows:

R8’s share: 17/870 x HK$22,388,888 = HK$437,484.80.

R9’s share: 28/870 x HK$22,388,888 = HK$720,563.20.

19.  Issue 1A was introduced by the Respondents at trial. Rs’ Closing positively alleges, for the first time, that the Meeting of owners on 19 August 2019 was invalid.The IO replies that the argument does not assist the Respondents’ case.

20.  Mr Young submitted that the Resolution is void because (1)  the Meeting was convened without a resolution of the MC; and (2)  the Meeting was convened by the Chairman of the IO, as opposed to by the Secretary, contrary to paragraphs 1, 2 and 3 of Sch. 3 of the BMO.

21.  Paragraph 1(1)(c), paragraph 2 and paragraph 3(7)  of Sch. 3 of the BMO provide:

“1. (1)  The management committee shall convene–

…

(c)  a general meeting of the corporation at any time for such purposes as the management committee thinks fit.”

…

“2. (1)  The secretary of the management committee shall, at least 14 days before the date of the meeting of the corporation, give notice of the meeting to each owner and the tenants’ representative (if any).

(1AA)  The notice of the meeting shall specify–

(a) the date, time and place of the meeting; and

(b) the resolutions (if any)  that are to be proposed at the meeting or other matters that are to be discussed at the meeting.

(1A)  The notice of meeting may be given–

(a) by delivering it personally to the owner or tenants’ representative (if any);or

(b) by sending it by post to the owner or tenants’ representative (if any)  at his last known address; or

(c) by leaving it at the flat of the owner or tenants’ representative (if any)  or depositing it in the letter box for that flat.

(2)  The secretary shall also, at least 14 days before the date of the meeting of the corporation, display the notice of the meeting in a prominent place in the building.”

...

“3. (7)  No resolution passed at any meeting of the corporation shall have effect unless the same was set forth in the notice given in accordance with paragraph 2 or is ancillary or incidental to a resolution or other matter so set forth.”

22.  In fact the notice of the 19 August 2019 Meeting was given by the Chairman, not “the secretary of the management committee” (“Notice”). There was non-compliance with paragraph 2(1)  of Sch. 3 of the BMO. Mr Young says that pursuant to paragraph 3(7)  of Sch. 3 of the BMO a resolution “shall have no effect” unless it was set forth in a notice given in accordance with paragraph 2 of Sch. 3 of the BMO. It was not. Therefore, the Resolution is void from the beginning. That is a complete answer to the IO’s claim. There is no basis to claim any contribution from the Respondents.  Further, there was no MC resolution.

23.  The IO’s case is as follows. First, paragraph 1 of Sch. 3 of the BMO confers on the MC of the IO a wide discretion to convene general meetings. The MC of the IO resolved to convene the Meeting for the purposes of, inter alia: (1)  briefing the owners of the Building on the content of the two inspection orders issued by the Buildings Department; (2)  reporting to the owners the tender results; (3)  discussing and deciding whether to proceed with the Project, the scope of the Project, the contractor to be engaged and the payment method.

24.  There is little doubt that the Meeting falls fair and square within the meeting of paragraph 1(1)(c)  of Sch. 3 of the BMO. The MC of the IO has the power to convene such a meeting. 

25.  Secondly, pursuant to paragraph 2 of Sch. 3 of the BMO, the Notice was duly given by the IO to owners of the Building on 1 August 2019, being more than 14 days before the Meeting, albeit by the Chairman rather than the secretary.

26.  In compliance with paragraph 2(1AA)  of Sch. 3 of the BMO, (a)  the date, time and place of the Meeting as well as, (b)  the resolutions to be proposed in the Meeting were clearly specified on the Notice. Based on the fact that 32 owners of the Building attended the Meeting, it is indisputable that the Notice had been received by owners. In fact, Mr Young, the director of R8 and R9, admitted during cross-examination that he had personally attended the Meeting as well.

27.  Despite the above, the Respondents argue that the Meeting was invalid because it was convened without a resolution of the MC and because it was convened by the Chairman as opposed to by the Secretary, contrary to paragraphs 1, 2 and 3 of Sch. 3 of the BMO. And therefore that the Resolution is void. Ms Lau submits that none of those ground of objection is valid as a matter of law, for the reasons below.

(1)   Whether the Meeting was conducted without valid authorisation or resolution of the MC

28.  The IO makes the following three points. First, the Respondents never pleaded that the Meeting was invalid by reason of the lack of a resolution of the MC. They ought not to be allowed to run this argument in Closing:

(1)  R8 and R9’s NOO pleads that they “do not admit” the legality and validity of the Meeting. Plainly, their plea then was a bare traverse. No affirmative or positive case was pleaded regarding the invalidity of the Meeting. 

(2)  Consequently, the IO was not given a sufficient indication as to the Respondents’ real objection or reason to dispute the validity and/or the specific aspects of the procedures that they take issue with, that the Meeting was convened without due authorisation nor resolution of the MC.

29.  In Kwok Chin Wing v 21 Holdings Ltd(2013)  16 HKCFAR 663, Ma CJ explained the unfairness of raising unpleaded issues in trial:

“The basic objective [of pleadings] is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case)  so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues…it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced.”

30.  The IO appreciates that the Lands Tribunal accommodates a degree of informality. That said, the prejudice resulting from the Respondents’ failure to plead its specific case cannot be overlooked. Had the Respondents pleaded their objection, the IO could have adduced evidence (documentary or witness evidence)  to answer it. Therefore, the Respondents’ unpleaded attack on the validity of the Meeting based on the “absence” of a MC resolution should not be entertained. I accept that had notice been given before trial the IO may have been able to adduce evidence to address the point. It was not.

31.  Second, on the evidence, it is more probable than not that the Meeting was convened with due authorisation or MC resolution:

(1)  The Notice of the Meeting provides that Instrument of Proxy shall be submitted to “Owners’ Secretary/Management Office” at least 48 hours before the meeting. That indicates that the Secretary of the MC was actively involved in facilitating the conduct of the Meeting. 

(2)  The Meeting minutes show that the Chairman, the Vice-Chairman, and all members of the MC (except Mr Hui Yee Kan and Mr Lam Yim Hing)  attended the Meeting. Clearly, an overwhelming majority of the MC knew about the Meeting and participated in it.

(3)  Despite this, there is no documentary evidence whatsoever that there was any complaint lodged by members of the MC stating that the Meeting was not authorised by the MC.

(4)  Even the director of the Respondents, who admitted to being physically present at the Meeting, did not testify that there was any such complaint. No evidence was adduced to suggest that the Meeting was unauthorised. Prior to the Rs’ Closing, no argument had been raised on the authorisation. 

32.  Third, the IO refutes the Respondents’ allegation that a resolution passed in a formal MC meeting is necessary for the Meeting of owners to be valid. Paragraph 1(1)(c)  of Sch. 3 of the BMO does not require the convening of an owners’ meeting to be done through resolution of the MC. The MC can lawfully resolve matters without a resolution passed in a formal committee meeting under the BMO:

(1)  Paragraph 10(2)  of Sch. 2 of the BMO only provides that such matters “may be” decided by a resolution passed by a majority of members present at the committee meeting. It is therefore not mandatory for MC to resolve those matters by a resolution in a meeting: The Incorporated Owners of Four Winds Apartment v Koa Hsung Land Investment Co Ltd & Others (Unrep., LDBM 218/2005, 6 November 2006)  at §20.

(2)  Here, the convening of an owners’ meeting is straightforward and simple. Furthermore, the topic to be discussed at the Meeting is a matter that the MC had been working on for over a year. It is hard to see why the Meeting had to be convened by a resolution in a meeting of the MC.

33.  I accept the IO’s three points. First, the failure to plead that the Meeting was unauthorised deprived the IO of the opportunity to adduce evidence to the contrary. Second, it is more probable than not that there was MC authorisation, given the above facts. Third, paragraph 1(1)(c)  of Sch. 3 of the BMO does not require the convening of an owners’ meeting to be done only through resolution of the MC. I find that the Meeting was authorised.

(2) Does the Notice render the Meeting / Resolution invalid?

34.  Similarly, the IO says it is immaterial that the Notice was issued in the name of the Chairman instead of the Secretary. It is accepted that paragraph 2(1)  of Sch. 3 of the BMO imposes on the Secretary of the MC the duty to give notice. That said, on a proper construction of paragraph 2(1)  of Sch. 3 of the BMO, the fact that the Notice was issued by the Chairman should not render the Meeting invalid.

35.  In The Incorporated Owners of the Colonnades v Gordon Tso & Co Ltd (Unrep., CACV 131/2005, 23 December 2005), the Court of Appeal held that the BMO must be construed against its proper context and purpose. One of the purposes of the BMO is to provide for the effective management of multi-storey buildings. It ensures that the intention of the majority of the owners is respected and enforced, rather than to allow individual owners to exploit or nitpick the procedural requirements in the BMO to the detriment of the majority of the owners. While this does not give the Management Committee a license to defy the requirements under the BMO, a holistic and reasonable approach must be adopted in interpreting the rules in the BMO to ensure that they operate fairly to all owners (§§31-35). 

36.  Thus, the tribunal has been reluctant to construe the requirements under Sch. 2 and Sch. 3 of the BMO as rendering a resolution or a meeting void on the basis of minor non-compliance, in the absence of express provision suggesting otherwise. 

37.  In The Incorporated Owners of Million Fortune Industrial Centre v Jikan Development Ltd & Another (Unrep., CACV 122/2000, 27 June 2000), the Court of Appeal found that the minutes of the management committee in that case were not certified or displayed, contrary to the requirement of paragraph 10(4A)  & (4B)  of Sch. 2 of the BMO. Godfrey JA held (§9):

“The provisions of clause 10, are, no doubt, mandatory. They do require the secretary to keep the appropriate minutes. They do require that the minutes are to be certified by the person presiding over the meeting and they do require the minutes so certified are to be displayed by the secretary in a prominent place in the building. But it does not follow that a resolution which can be proved aliunde (as the Latin scholar say)  to have been duly passed must be ignored by the court simply because the person presiding over the meeting, or the secretary may have failed in one or other of these duties.”

38.  Rogers JA agreed (§13):

“I only wish to add this, that I read the provisions of paragraph 10 of the Second Schedule of the Ordinance as mandatory requirements which are designed to ensure that the owners are kept informed as to the transaction of the management committee. The failure of the chairman of the management committee, or indeed, the secretary, to comply with those provisions does not, in my view, render the resolutions which have been passed invalid or unprovable…”

39.  In Chartpack Machinery Co Ltd v 達之路 32, 32A, 34 及 34A號業主立案法團(Unrep.,LDBM 249/2014, 15 March 2017), the Lands Tribunal had to decide whether the meetings and the resulting resolution to increase management fee and/or repair common parts of the building were valid and binding on the owners. The owner complained that the management committee failed to comply with paragraph 2(1), (1A), (2), 4(5)(a)(i), 4(5)(a)(ii)  of Sch. 3 of the BMO. The Tribunal rejected those complaints. Applying The Incorporated Owners of Million Fortune Industrial Centre, the Tribunal held that a reasonable and holistic approach must be adopted to construe the procedural requirements under Sch. 3 of the BMO. In the absence of clear and express provisions (such as paragraph 3(7)  of Sch. 3), minor procedural non-compliance would not invalidate the meetings and the resolutions (§§44-48, 52).

40.  The provisions of the BMO must be construed against the proper context and purpose. One of the purposes of the BMO is to provide for the effective management of multi-storey buildings. A reasonable approach must be adopted in interpreting the rules in the BMO to ensure that they operate fairly to all owners.

41.  First, on a textual construction, paragraph 2(1)  of Sch. 3 of the BMO, provides “The secretary of the management committee shall” at least 14 days before the date of a meeting give notice to owners of the particulars of the meeting and resolutions as specified. The word “secretary” comes before the word “shall” which comes immediately before what must be done. While the duty is on the secretary, it may be read as imposing mandatory requirements as to time, place, notice content and manner of service but not as to who must give that notice. On that basis the “shall” mandates what must be done rather than who it must be done by.

42.  As a matter of fairness owners must be given notice in a timely fashion of where and when a meeting is to take place and, crucially, the resolutions that are to be proposed and matters to be discussed at the meeting. It should make no difference to an owner whether that notice was given by the secretary, provided it contained all the necessary information to inform the owner of the resolution and to be able to attend in person or by proxy, if the owner wished.

43.  In the present case, Notice of the Meeting was in fact given to owners of the Building. The resolutions to be proposed and matters to be discussed were specified in the Notice. As such, procedural fairness was duly observed by the MC. The non-compliance with paragraph 2(1)  of Sch. 3 of the BMO is as to who gave the Notice, not when, where given or the Notice content. The fact that Notice was issued by the Chairman, and not the Secretary, does not give rise to any discernible prejudice to owners of the Building. In my view the owners would not be prejudiced regarding their right to participate in general meetings by the Notice being given by the Chairman, not the secretary. That is not material or may be regarded as minor, insubstantial non-compliance. Paragraph 2(1)  of Sch. 3 of the BMO should not be construed as rendering the Meeting and/or the Resolution invalid on the basis of such minor procedural irregularity, absent clear statutory wording to that effect. The provision does impose mandatory requirements, but it does not follow that a resolution if duly passed is invalid merely because the secretary failed in its duty: per Godfrey JA at §9, Jikan Development. 

44.  Upon a proper construction of paragraph 2(1)  of Sch. 3 of the BMO, the fact that the Notice was not given by the secretary does not render the Notice invalid.

45.  Paragraph 3(7)  of Sch. 3 of the BMO provides that “No resolution passed at a meeting of the corporation shall have effect unless the same was set forth in the notice given in accordance with paragraph 2.” Upon a proper construction it requires that the “resolution” be set forth in the notice in accordance with the mandatory provisions as to time, place and content. If the individual who gives the notice is not a mandatory requirement under paragraph 2, that the Notice was not given by the secretary does not result in the Resolution having no effect by virtue of paragraph 3(7)  of Sch. 3 of the BMO. As a matter of construction, notwithstanding the word “shall” in paragraph 3(7), I find that the fact that the Notice was not given by the secretary is not a basis to hold that the Meeting, or the Resolution passed in the Meeting is invalid.  

46.  Further or alternatively, the IO submits that applying the “irregularity principle”, the Meeting and the Resolution are valid. The essence of the irregularity principle was explained by Le Pichon J (as she then was)  in Yip Peter v Asian Electronics [1998] 2 HKC 96:

“The irregularity principle really comes to this: the lawfulness of a decision taken by a meeting of members or board cannot be questioned if the only facts alleged to make it unlawful is a mere informality and the intention of the meeting is clear. This is particularly so if there is no evidence that the decision of the meeting would have been different if the correct procedure had been observed.”

47.  Mr Young points out that the principle is applied in company law cases relied upon by the IO. The BMO is structured differently and operates differently from the Companies Ordinance and to company law generally. The IO replies that the principle has been applied in the BMO context, where the proposition is clear, that minor discrepancies do not invalidate resolutions. The principle is endorsed and applied in a series of cases concerning building management:

(1)  In The Incorporated Owners of Kai Tak Garden (Choi Hung Road)  v Woo Tak Yan & Another(Unrep., HCSA 37/2021, 25 May 2022), Marlene Ng J, the Incorporated Owners commenced proceedings at the Small Claims Tribunal to recover unpaid management fees against two owners. The owners argued that one of the meetings of the MC was chaired by the Vice-Chairman, contrary to the requirement of paragraph 8(1)  of Sch. 2 of the BMO. The Small Claims Tribunal applied the irregularity principle, holding that the intention of the meeting was very clear. Accordingly, mere irregularities in the procedures of the meeting, namely not being convened by the chairman and not displaying the relevant notice of meeting and agenda, would not defeat the validity of the meeting nor the resolution. Marlene Ng J affirmed the Small Claims Tribunal’s decision (§186).

(2)  In Yu Hing Kwok & Another v The Incorporated Owners of Lung Poon Court (Blocks A-F)  & Others[2018] HKLdT 48, the Lands Tribunal was asked to decide whether an owners’ meeting was presided over by the Incorporated Owners’ solicitors, contrary to paragraph 3 of Sch. 3 of the BMO. Based on the evidence adduced the Tribunal held that the said meeting was presided over by the Chairman. The Tribunal then remarked that even if the meeting was presided over by the solicitor, the meeting was still valid in view of the irregularity principle. The sole basis of challenging the meeting’s validity rested on procedural irregularity of the meeting. However, the intention of the meeting was very clear. Further, there was no evidence that the majority attending the meeting would have voted differently had the correct procedure been adopted. Hence, owners’ submissions were rejected. 

48.  I accept that on the facts, the intention of the Meeting was clear, as evident in the Meeting minutes. There is no evidence whatsoever that the outcome of the Meeting would have been different if the same Notice was given, at the same time and place, but by the Secretary rather than the Chairman, pursuant to paragraph 2(1)  of Sch. 3 of the BMO. If it were necessary to apply the irregularity principle, applying that principle I find that the Resolution is valid. 

49.  I have considered the three authorities cited in Rs’ Closing to substantiate their case. They are readily distinguishable from this case:

(1)  In The Incorporated Owners of Pearl Island Garden v Hui Chan Soon Hoy & Hui Suk Yee Elizabeth [2005] 1 HKLRD 795, the Lands Tribunal declared that the owners’ meeting and the resulting resolution were invalid because the revised notice of the meeting was given in less than 14 days. The Court of Appeal held that the Tribunal had erred in its calculation. Further, the revised notice was, in substance, the same as the original notice given earlier. Therefore, there was no issue with the propriety of the notice. The case does not concern a notice issued by MC members other than a secretary and is not relevant. To the contrary, it is another example of the Court’s reluctance to adopt a rigid approach towards procedural irregularities of owners’ meetings. 

(2)  Homechant Ltd v The Incorporated Owners of Rich Building (Unrep., DCCJ 1992/2007, 12 February 2010)concerns a MC meeting which was convened without notice to members of the MC and without a quorum. The facts are clearly distinguishable from the present case. The decision does not assist the Respondents.

(3)  In Fung Yuet Hing v The Incorporated Owners of Hing Wong Mansion & Others (Unrep., LDBM 367/2004, 12 October 2005), majority of owners present at the owners’ meeting rejected all tenders. The MC however proceeded to sign the repair contract with one of the contractors. The District Court held that the MC had no authority from owners to enter into such contract because no valid resolution was passed at the owners’ meeting to approve of the repair project. Again, the facts are distinguishable.

50.  For the above reasons I find that the Resolution is binding on R8 and R9: section 14(1)  of the BMO. In answer to Issue 1, each R8 and R9 are required and liable under Clause 4(f)  and 4(h)  of the DMC of the Building to contribute to the costs of the Project in the proportion prescribed by section 22 of the BMO.

51.  In answer to Issue 1A, the Meeting of owners on 19 August 2019 was validly convened.

52.  Issue 7, is as to the sum each R8 and R9 are liable to contribute. The IO relies on the contribution table prepared by its former solicitors, Messrs S.K. Lam, Alfred Chan & Co. for the calculations, which the Respondents have never disputed. The cost of the Contract, $22,388,888 was apportioned to the owners of the Building based on the proportion of undivided shares they owned. R8 owns 17 out of 870 undivided shares so R8 is responsible for $437,484.80. While R9 owns 28 out of 870 undivided shares so is responsible for $720,563.20.

53.  In answer to Issue 7, the sum of the contribution which R8 is liable for is $437,484.80 and the sum of the contribution which R9 is liable for is $720,563.20.

Issues 2, 3, 4: Whether section 20A of the BMO negates the liability of R8 and R9 to contribute to the costs of the Project

54.  Paragraph 5.1 of the Code issued by the Authority under section 44 of the BMO provides that a tender shall be sealed and deposited in a strong double-locked box marked “Tender-Box”, provided for that purpose only and such box shall be securely located in a prominent place “in the building”. The tender box of the Tender Exercise was placed in the office premises of the law firm engaged by the IO. It was not located in the Building, contrary to paragraph 5.1 of the Code. That was admitted by the IO’s witness Mr Yeung during cross-examination. The tender box has been referred to by the parties as the “bidding box” and the tenders as “bids”.

55.  The IO submits that non-compliance with paragraph 5.1 of the Code and section 20A of the BMO does not have the effect of nullifying or rendering the Resolution void or voidable. Nor does section 20A(9)  of the BMO impose liability for the Contract on the IO (or certain members thereof).

56.  The IO explains that the tender box was placed in the office premises of IO’s solicitors and not in the Building to avoid improper tampering with the tenders from the prospective contractors. As such, the Tender Exercise deviated from paragraph 5.1 of the Code.

57.  The starting point is that all resolutions passed by owners in a general meeting that concern the renovation and improvement of the common parts are binding on owners of the building. Section 14(1)  of the BMO provides that:

“Subject to this Ordinance, at a meeting of a corporation any resolution may be passed with respect to the control, management and administration of the common parts or the renovation, improvement or decoration of those parts and any such resolution shall be binding on the management committee and all the owners.”

58.  The IO submits that plainly, the Resolution is a regular resolution. Unless the Resolution is declared void or voidable, it is binding on the Respondents.

59.  It is well-established that non-compliance with the Code, other than paragraphs that have been incorporated in to the BMO, does not render an owners’ resolution invalid.

60.  In 麗苑業主立案法團 v韓炳基 & Another, (Unrep., CACV 1716/2001, 6 August 2002)  (“Beauty Court”), the Incorporated Owners of Beauty Court sought to recover renovation costs of repairing the lifts and external wall of the building against the respondents. The respondents refused to pay, arguing that only three companies participated in the tender process, violating the requirement of the Code.

61.  The Court of Appeal rejected their arguments, holding that if the applicant had not invited tenders from at least 5 companies for the replacement of the lift in accordance with the Code, this would render the respondent not liable to pay for the replacement of the lift. Section 44(1)  of the BMO states that the function the Code is to give guidance and directions to an Incorporated Owners. Section 44(2)  of the BMO does not expressly state that any decision not in compliance with the Code will render the decision invalid. In determining the validity of the said resolution, the Court also had to take into account the fact that the resolution was passed at a meeting of the owners and those who voted for the resolution accounted for 70% of the total number of owners of the building. The Court held that even if the applicant did not follow the Code, it would not render the resolution invalid.

62.  The Court of Appeal decision in Beauty Court has been consistently applied in subsequent cases:

(1)  In Imax Investments Ltd & Others v The Incorporated Owners of Yue Shing Commercial Building (Unrep., LDBM 316/2004, 29 April 2005), the applicant argued that there was no valid tender to award the contract for fire safety improvement works in breach of section 20A(1)  of the BMO. Therefore, the relevant owners’ resolution approving the works should be declared void. The Lands Tribunal disagreed with the applicants, following Beauty Court (§36).

(2)  In The Incorporated Owners of Nos 6, 6A, 6B, 8, 10, 12, 14 & 16 Wing Kwong Street (In Compulsory Liquidation)  v Wong Kang Ming (Unrep., DCCJ 4022/2012, 20 April 2015), owners of the building passed a resolution to renovate the building and that the costs of the project shall be paid in 3 instalments. The respondent refused to pay his share of the repair costs. The respondent argued that the relevant resolutions failed to comply with the Code and therefore section 20A(1)  of the BMO. Citing Beauty Court, the District Court held that non-compliance with the Code would not render the relevant resolutions invalid (§68).

(3)  In The Incorporated Owners of Grenville House v Wong Tak Keung Stanley & Another [2024] HKLdT 40, the respondents argued that the Incorporated Owners was in breach of section 20A(1)  of the BMO by refusing their requests to inspect returned tenders for the prescribed works of the building in accordance with the Code. The Lands Tribunal rejected that argument. Deputy Judge SH Lee (as he then was)  held that Beauty Court is binding on the Tribunal. The Code is directory in nature and any alleged breach of the Code would not cause the relevant resolutions to be invalid or relieve the respondents’ liability to pay their share of the contribution of the prescribed work (§§79 & 92).

63.  The IO is aware that the Lands Tribunal has granted leave to the respondents in The Incorporated Owners of Grenville House to appeal to the Court of Appeal on public interest grounds: [2024] HKLdT 69. The ground of appeal concerns whether the Code is mandatory such that the Incorporated Owners in that case is required to allow the respondents to inspect tender documents. The IO submits that the outcome of that appeal has no bearing on the present case. The issue on appeal does not concern the impact of non-compliance with the Code on the validity of an otherwise valid owners’ resolution. On the contrary, it is axiomatic from the long line of authorities cited above that non-compliance with paragraph 5.1 of the Code and thus section 20A(1)  of the BMO does not invalidate the Resolution.

64.  The Respondents also argue that the IO should be personally liable for the repair costs of the Project pursuant to section 20A(9)  of the BMO. Ms Lau terms the argument misconceived.

65.  Section 20A(9)  of the BMO provides that:

“subject to section 29A, any person who enters into a contract for the procurement of any supplies, goods or services otherwise than in compliance with subsection (2)  or, if applicable, subsection (2B)  may be personally liable for any claims arising from the contract.”

66.  In 輝振有限公司 v 何耀與 & Others [2024] HKLdT 34, the Lands Tribunal held section 20A(9)  of the BMO is only applicable when sections 20A(2)  and 20A(2B)  have not been complied with (§159). Here, the Project was carried out following a tender exercise as required by section 20A(2)  and the Resolution of the owners passed at a general meeting as required by section 20A(2B). Since those two sections had been complied with, section 20A(9)  of the BMO is inapplicable. 

67.  Furthermore, section 20A(9)  of the BMO does not have the effect of imposing liability on the IO:

(1)  In 輝振有限公司, the Lands Tribunal held that on a proper construction section 20A(9)  of the BMO in the event of non-compliance with sections 20A(2)  or 20A(2B), an individual who enters into a contract for the procurement of the services of an IO may be personally liable for the claims arising out of that contract. The section by itself does not impose personal liability on the individual (§159).

(2)  In the present case, no claim arose out of the Contract against the IO. The IO is merely seeking to enforce the Resolution and Clause 4(i)  of the DMC against R8 and R9. Hence, section 20A(9)  of the BMO has no application here.

68.  It is not established that any person, or the IO, shall be personally liable pursuant to section 20A(9), BMO. Non-compliance is not proved and there is no material claim arising out of the Contract.

69.  Insofar as the Respondents argue that the Contract is void and/or voidable, the IO submits that the argument is untenable:

(1)  Section 20A(5)  of the BMO states that “a contract for the procurement of any supplies, goods or services shall not be void by reason only that it does not comply with subsection (1).”. The effect of the section is self-evident.

(2)  The Lands Tribunal would not declare the Contract invalid in the absence of the Contractor. HHJ M. Wong in previous hearings gave the Respondents notice that unless the Contractor be joined as a party that was the position. Nevertheless, the Respondents did not join the Contractor to these proceedings.

(3)  In any event, the validity of the Contract has no bearing on R8 and R9’s liability to contribute to the costs of the Project, which stems from the Resolution.

70.  I accept accordingly, section 20A of the BMO does not negate the liability of R8 and R9 to pay their share of the repair costs. The Contract remains valid: section 20A(5)  of the BMO. Rs’ Closing does not expressly refute the IO’s case on section 20A of the BMO. The Respondents’ section 20A of the BMO defence is without merit.

71.  In answer to Issue 2, the tender process of the Project did not comply with section 20A of the BMO, in that the tender box was not located in the Building. It was placed in the IO’s solicitors’ office.

72.  In answer to Issue 3, I find that the non-compliance with section 20A of the BMO does not negate the liability of R8 and R9 to contribute to the costs of the Project.

73.  In any event, the IO asserts that members of the MC have acted in good faith and reasonably at all material times. Therefore, pursuant to section 29A(1)  of the BMO, members of the MC would not be personally liable for any act done on behalf of the IO.

74.  The Respondents’ case is that there is fraud or at the least bad faith. Mr Young submits that it is certainly bad faith, far beyond the balance of probabilities. The Respondents are not able to identify any individual who lacked good faith or acted in bad faith, save to allege all those involved in the scam. Mr Young points out the difficulty for owners, who are not privy to the scam, in finding evidence to prove it.

75.  Ms Lau submits that the allegation that the MC had defrauded owners of the Building in procuring the Resolution is devoid of any evidential basis. Therefore, they would be protected by section 29A(1)  of the BMO. I find that there is a dearth of evidence of bad faith. There is no evidence that any individual member of the MC (or the MC as a whole)  lacked good faith, acted in bad faith or in an unreasonable manner. On the facts they would not be personally liable: section 29A(1)  of the BMO.

76.  In answer to Issue 4, I find that section 20(A)  of the BMO does not negate the liability of R8 and R9 to contribute to the costs of the Project. The Contract was not entered into by any person otherwise than in compliance with subsection (2)  or subsection (2B). The procurement was by invitation to tender and whether to accept a tender was decided by resolution of owners in general meeting.

Issues 5 & 6: Whether owners of the Building have been defrauded

77.  The crux of the Respondents’ defence is that the IO had been hijacked by a group of “scammers”. They include certain members of the MC, the Consultant and all 18 bidders (“Scammers”).

78.  The Respondents’ conspiracy case is that the Project was a “false pretense”. It was put up by the Scammers to deceive and/or induce owners of the Building into paying the cost of the Contract, which is inflated and in fact was wholly or partly pocketed by the Scammers.

Unlawful means conspiracy

79.  It is unclear to the IO what cause of action the Respondents rely upon but the closest resemblance would be unlawful means conspiracy. Ms Lau suggests that the Respondents wish to argue that the Resolution was tainted by such civil fraud and is therefore void or voidable. The IO replies to such a defence below.

80.  As a matter of law, the Respondents have to prove the following elements to establish unlawful means conspiracy:

(1)  A combination or agreement between two or more individuals;

(2)  An intent to injure;

(3)  Pursuant to which combination or agreement and with that intention certain acts were carried out;

(4)  The acts involved are unlawful;

(5)  Resulting loss and damage to the Respondents;

(6)  The unlawful acts were the means of inflicting harm on the Respondents.

See Bullen & Leake (19^th Ed.)  §§59-02 & 59-06.

81.  As proceedings progressed, the matters on which the Respondents rely to prove the conspiracy changed or were supplemented. The IO endeavoured to identify those matters, which are:

(1)  At pleading stage, the Respondents alleged and relied on the following to establish the “conspiracy”:

(i)  the price of the Project had been rigged by the Scammers;

(ii)  the Project was unnecessary;

(iii)  the tender was done by way of a “blind tender”, which caused the price quoted by bidders to be inflated;

(iv)  unusually the tender was handled by solicitors;

(v)  the fact that blind tender was adopted was not disclosed to owners of the Building.

(2)  Shortly before and/or during trial, the Respondents expanded their case to rely also on the following additional allegations: 

(i)  Receipts issued by the Contractor are forged. The Contract and the Tender are not legally binding.

(ii)  Since the IO opposed the Respondents’ application for production of original documents for inspection in the middle of the trial, there must have been “no real documents” about the Project.

(iii)  The Contractor is “fake”. The Respondents suspect that another contractor had performed the Project at a significantly lower price, allowing the Scammers to pocket substantial profits from the contribution paid by owners of the Building.

(iv)  There was a 21 month time lag between the date of assessment on the payment certificate of the 14^th instalment and the completion date of the Project.

(v)  The amount of consultancy fee charged by the Consultant was unreasonably low. It is more likely that it had a “share of scam earnings”.

(vi)  The IO’s witness Mr Yeung refused to confirm the completion date of the Project.

(vii)  The Tender was unfair to the other bidders because the Contractor had previously done scaffolding works at the Building.

(viii)  The Contractor was given the exclusive privilege to reduce its bid price while other contractors were not given such opportunity to do so. 

(ix)  The Contractor knew the details of the tender before bids were opened.

82.  The above is a fair statement of the facts and matters relied upon by the Respondents, if not precisely in Mr Young’s terms. The IO addressed each allegation in turn, concluding that those matters (whether taken separately or collectively)  fall far short of proving that there had been any conspiracy or establishing any viable defence.

Burden of proof and standard of proof

83.  The burden of proof lies on the Respondents, who allege that the Resolution was void because of a conspiracy to defraud owners of the Building / price-rigging. Phipson on Evidence (20^th Ed.), at §6-06 states:

“So far as the persuasive burden is concerned, the burden of proof lies upon the party who substantially asserts the affirmative of the issue. Where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegations rests on that party…This rule is adopted principally because it is just that he who invokes the aid of the law should be the first to prove his case; and partly because, in the nature of things, a negative is more difficult to establish than an affirmative.”

84.  The more serious an allegation is, the less likely it is that the events in question occurred, and hence, the more cogent should the evidence before the court be, to conclude that the allegation is established on the balance of probabilities: Re H (Minors) [1996] AC 563 at 586C-H.

85.  The allegations of the Respondents are extremely serious, being that a significant group of unrelated parties worked together to defraud owners of the Building. In the absence of cogent and compelling evidence, the tribunal should be slow to draw such a conclusion.

Credibility

86.  In assessing the factual evidence given by a witness, the tribunal is guided by the principles in Hui Cheung Fai & Another v Daiwa Development Ltd & Others (Unrep., HCA 1734/2009, 8 April 2014)  at §§77-80:

“Generally speaking, contemporaneous written documents and documents which came into existence before the problems in questions emerged are of the greatest importance in assessing credibility…

In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events…

In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses…or from the assessment of the witnesses’ character.”

87.  Two witnesses gave evidence. Mr Yeung is the manager of the IO and a former police officer. He claimed to have a deep understanding of the material matters in his witness statements. He was not on top of the detail by the time he gave his oral evidence. Giving of evidence is not a test of memory. For example, I do not accept the Respondents’ criticism that because he could not say off the top of his head the precise date of completion for the Project he must be dishonest or treated as unreliable. He was willing to provide the date if given the chance to look at documents. However, I did not find him a particularly impressive witness. He sparred with Mr Young, on occasion giving smart responses with attitude. That said, he was not obviously dishonest. I put character aside in assessing reliability and particular matters below.

88.  Mr Young gave evidence for the Respondents. He is elderly and has recently suffered a stroke. He clearly feels very strongly about what has happened and, notwithstanding the toll that these proceedings have taken on him, he feels that someone must stand up to the Scammers. Mr Young fairly conceded points put to him regarding the limits of his evidence. He readily accepted that he was not an expert and opinions he expressed were just his personal opinions, even accepting that matters were speculation. However, he has been in the property business for 50 to 60 years and I accept he has decades of experience to draw on. For example, he observed that the quality of the painting was very poor. He saw in places there was mere touch up or patch repair, not multiple coats of paint as provided in the Contract. That is something he could state from personal observation, without expert qualification. I accept that works may not have been of the standard he would expect.  

89.  I have no hesitation in accepting Mr Young as an honest witness. He undoubtedly believes that owners of the Building are victims of a scam and that the price for the works was inflated. He has been involved in many renovation and repair projects so has a feel for the sums that should be involved, depending on details of the works and materials. However, the tribunal must make findings of fact based on evidence. Mr Young’s opinions are not admissible to prove matters requiring expertise or facts which the Respondents have no other evidence to establish.  

Drawing of inferences

90.  The law on the drawing of adverse inferences based on the absence of a particular piece of evidence is well settled. Such inference can only be drawn when the person seeking to draw the adverse inference can demonstrate that (i)  there is a prima facie case based on the evidence already adduced; (ii)  the party whom the case is established against has evidence available which could displace the prima facie case and which it omits to call. Adverse inference has no place if no prima facie case can be established by the person seeking to rely on the inference: Nina Kung v Wang Din Shin (2005)  8 HKCFAR 387 at §§367-369.

91.  If there are reasonable explanations for the absence of that evidence, then no such inference may be drawn: Pacific Electric Wire & Cable Co Ltd v. Texan Management Ltd & Others (Unrep., CACV 90-91, 93-96/2012, 17 September 2013) at §106(4).

Analysis

92.  The IO is adamant that the allegations made by the Respondents are not substantiated. They fall far short of proving the existence of any price-rigging exercise or conspiracy to defraud owners.

(1)   No loss or damage proven

93.  A key element of the Respondents’ conspiracy case is that the price of the Project had been artificially inflated by the Scammers, which caused owners, including the Respondents, to suffer loss. The IO submits that there is no evidence to prove essential elements of an unlawful means conspiracy, including the resulting loss. The claim that the price was grossly above market price is solely based on the opinion of Mr Young. However, Mr Young frankly admitted that he has no professional qualification in architecture, construction or surveying. No expert evidence was adduced by the Respondents to support the allegation. Mr Young also agreed that his claim is a bare assertion.

94.  During cross examination Mr Young raised a new ground to prove loss. He said that the Project must have been carried out by a much cheaper and smaller size contractor. He based this on his observation that the painting of the staircases was substandard. However:

(1)  Mr Young fairly admitted, he has no evidence that the staircase painting was substandard. There is no evidence that a cheaper contractor had carried out the Project works.

(2)  All contemporaneous documents, including the Contract, the receipts and the payment certificates showed that the Contractor had carried out the Project.

95.  Despite the above, Mr Young insisted that another contractor must have carried out the Project at a cheaper price, because all documentary evidence showing the Contractor was actually involved in the Project was “fiction”. Mr Young based his view on the IO’s inability to produce the originals of documents specified by the Respondents during trial. Essentially, Mr Young was inviting the tribunal to draw an adverse inference against the IO to the effect that all documents adduced by the IO showing the involvement of the Contractor are either fake or forged. Ms Lau replies that: 

(1)  The allegation that documents had been forged or falsified by the IO is of utmost seriousness. Unless cogent and compelling evidence is adduced, such an accusation must be rejected. The Respondents are unable to establish a prima facie case that the documents provided by the IO were all forged from pre-existing evidence. There is simply no room for adverse inference to be drawn in those circumstances.

(2)  Even if there is a prima facie case to answer, which the IO denies, there are reasonable explanations as to why the IO could not produce the originals of the documents specified by the Respondents (namely Exhibit YKF-12 to YKF-33)  (“Specified Documents”)  at the trial:

(i)  At all material times, the Specified Documents are stored in an external warehouse in Tsuen Wan. Since they ran up to 200 odd pages, at least one week is required for the IO to retrieve them.

(ii)  On the first day of the trial, the Respondents requested, for the first time, the production of the originals of the Specified Documents. The IO resisted the application due to the severe lateness and fear that the production exercise would necessitate an adjournment of the trial. The late application was dismissed.

(iii)  On the second day of the trial, the Respondents applied for a review of the decision of the tribunal. The IO opposed the review for the same reasons. The tribunal again dismissed the Respondents’ application.

(iv)  In a gesture of goodwill, the IO voluntarily agreed to produce the originals of the Specified Documents shortly after the review application. However, it was unable to produce the originals of those documents on the spot for the above reasons.

(v)  Had the Respondents requested those documents in advance of the trial, the IO would be able to arrange for the production before or during the trial.

(3)  In any event, the IO agreed to produce the originals that are still within its possession, control and power. By letter dated 27 January 2025 the IO offered the Respondents inspection of original Specified Documents that it managed to retrieve from its warehouse. There is, therefore, no room for adverse inference to be drawn on that basis. However, Mr Young replied that the documents that the IO volunteered to produce were not actually produced. The letter dated 27 January 2025 stated that originals that they had volunteered to produce were not found. Mr Young says “more likely they never existed in the first place”. Some Government orders, that were not disputed, were produced. Ms Lau explained in closing that for the copy documents that the Respondents still pursued, the IO then obtained certified copies for the Respondents, but they were still not satisfied. 

(4)  Mr Young made much of the receipts issued by the Contractor. He says that by virtue of an inspection of documents prior to trial at the IO’s solicitor’s office on 17 December 2024 of receipts of the Contractor, they uncovered that the photocopies attached to the witness statement of Mr Yeung are “fake”. Mr Yeung was unable to give a satisfactory explanation in cross-examination. Therefore, on the balance of probabilities, other documents that are mere photocopies attached to his witness statement are also false. Otherwise why would he refuse to produce the documents that are in support of his case? So while the solicitors volunteered to produce originals they subsequently declared “not found”, and the Respondents say “Never existed” is closer to the truth. Therefore, the Respondents’ case includes that the receipts are false or “fake” documents. Whereas the IO submits that Mr Yeung has adequately explained the situation under oath:

(i)  The IO received the receipts from the Contractor by email as electronic copies.

(ii)  At the “very first stage” of the proceedings, Mr Yeung printed out those receipts from his email account for the purposes of these proceedings. He deposed that he did so around a year ago, pursuant to an order of HHJ M. Wong herein.

(iii)  Subsequently, the Respondents requested the IO produce the original of those receipts. Mr Yeung asked the Contractor to provide them. He received those documents from the Contractor by courier. The inspection of those documents then took place on 17 December 2024 at the solicitors’ office.

(iv)  The Respondents were not satisfied with the documents they inspected. Hence, the IO requested the Contractor to prepare the certified true copy of the same receipts which were shown to the Respondents on the first day of trial and produced as Exhibit A-1. 

(v)  Those receipts are therefore not fake. The reasons why three sets of those receipts had been produced by the IO were explained by Mr. Yeung under oath.

(vi)  Mr. Yeung’s evidence shows that the IO has used its best endeavours to obtain documents in the most original form. No original could be provided only because the receipts received by the IO are themselves electronic copies. In these circumstances, no adverse inference should be drawn against the IO.

96.  Notwithstanding the explanation of Mr Yeung, Mr Young refused to accept that the receipts had indeed been issued by the Contractor. He accused Mr Yeung of lying, alleged that the certified true copies of the receipts were a fiction, and was adamant that the Contractor had not participated in the Project. Mr Young said that “thousands of communications” could have been adduced by the IO to show the involvement of the Contractor in the Project, but the IO had failed to.

97.  The IO considers Mr Young’s stance unreasonable:

(1)  There is no good reason to reject Mr Yeung’s evidence on how the three sets of receipts came to be produced.

(i)  Mr Yeung may not be the most eloquent witness. He would at times be confused by the convoluted questions asked by Mr Young. He does not have perfect memory. That said, he is direct and forthcoming answering questions put to him as best as he could. His answers were straightforward. He would also volunteer to elaborate and explain his answers. When he could not recall the matter, he fairly admitted it. He acknowledged and apologised for mistakes.

(ii)  Furthermore, his evidence of how the three sets of receipts produced came into existence is consistent with contemporaneous evidence and court documents.  

(iii)  His evidence also explains why the three sets of receipts have the same content but with company chop(s)  and signature(s)  at different location and colour. The IO submits that Mr Yeung is credible.

(2)  There is no basis to allege the certified true copies of the receipts are forged.

(3)  Various contemporaneous documents had been produced and exhibited by the IO which showed that the Contractor had undertaken the Project. The Respondents simply refuse to accept them. 

(4)  Ms Lau observed that it is apparent from Mr. Young’s answers that he has a strong (but mistaken)  conviction that the Project was a scam. He would not accept any evidence adduced by the IO insofar as it is inconsistent with his theory.

98.  Mr Yeung was cross-examined, inter alia, on the copy of the receipts attached to his witness statement. He said they were produced at the beginning of the proceedings. While he was unable to recall the precise court order he had in mind, there was indeed an order of HH J M. Wong on 9 August 2023, directing that the IO file and serve their affirmation on or before 4 October 2023 in opposition to the Interlocutory Application of R8 & R9 dated 2 August 2023 seeking discovery of documents and particulars. I accept that the receipts of the Contractor were initially received by the IO in electronic form and first adduced herein exhibited to the affirmation dated 4 October 2023. As such, Mr Yeung’s recollection is consistent with the contemporaneous court order and has the ring of truth. I also accept that the second copy of the receipts were produced by the Contractor because of the Respondents’ request for inspection. Further, I accept that the third set of receipts produced at the trial, as Exhibit A-1, were duly certified copies by the Contractor and produced because the Respondents were not satisfied with the copies inspected.

99.  The allegation that all documents of the Contractor are false is extremely serious. There is no prima facie case that they are forged or “fake”. I cannot infer from the manner of production of the receipts, or other evidence, that all documents of the Contractor are false. I find that the Respondents’ argument that a cheaper contractor had undertaken the Project works in place of the Contractor is not established.

100.  The Respondents contend that owners had been duped to pay for renovation work that was wholly unnecessary. Again, the IO submits the claim is unsubstantiated:

(1)  The two BD Notices issued by the Buildings Department made clear that the IO is required to inspect the common parts of the Building, and if necessary, repair the common parts.Mr Young points out that the BD Notices require inspection, they are not orders to do any particular works, but owners may be persuaded that they have to do unnecessary work as part of a scam.  

(2)  To that end, the Consultant was engaged by the IO to prepare a detailed inspection report of the Building (“Inspection Report”). Upon the inspection of the registered inspector, the Consultant listed the common parts that required repair in the Inspection Report of 650+ pages.

(3)  No expert evidence has been adduced by the Respondents to substantiate its claim, which again, has no evidential basis.

(4)  Mr. Young admitted during cross examination that the Respondents’ claim is based on his “gut feeling”. The IO replies that his baseless opinion should be rejected.

101.  The Consultant would be a key participant in any scam. The Consultant provided the Inspection Report identifying the works that were required by reason of the BD Notices, overseeing the works and payments. Mr Young appears to have a genuine grievance that works were undertaken that were not required, while there were more important works for the owners of an old building that were not undertaken, such as for lifts. However, as independent lift contractors would not be drawn into the scam, lift works were not done. The Respondents have not identified which works were unnecessary by reference to the Inspection Report, tender documents, Contract or otherwise, nor adduced expert evidence as to what was actually required, if not the Contract works. It is not proved that the owners were caused to pay for unnecessary works. 

102.  The IO submits that the Respondents’ conspiracy case must fail for the above reasons. The Respondents have not shown that they have suffered any loss and damage because of the alleged conspiracy. In Bullen & Leake at §59-07, the authors explain:

“Damage is the gist of a civil action for conspiracy. The tort is complete only if the agreement is carried into effect so as to damage the claimant. There must be a causal link between the unlawful act complained of, and the damage alleged.”

103.  An essential element of any unlawful means conspiracy is the resulting loss. There was no evidence adduced to establish what a reasonable price or the proper amount should be, if not inflated, nor that unnecessary works were carried out and charged to the owners.  I find the Respondents have failed to prove loss.

(2)   No evidence of agreement

104.  The IO continues, the Respondents also failed to prove that there was any agreement between the Scammers to dupe owners of the Building through the Project. There is no evidence showing that the Scammers communicated or combined to form any agreement. Nor is there evidence that any members of the MC had received any monetary benefits from which an agreement to defraud owners may be inferred. 

105.  Mr Young asserted that the existence of such an agreement can be inferred from the IO’s inability to produce the originals of documents specified by the Respondents. I have accepted the IO’s explanation in respect of the documents. I cannot infer the alleged agreement from the absence of original documents.

106.  The IO submits that adopting a blind tender in no way shows that there was a conspiracy agreement to rig the price:

(1)  The IO explained, blind tender was to avoid potential collusive bidding and corruption. If the bidders do not know the name and address of the Building, the name of the Consultant, and the management company, they cannot identify or reach out to members of the MC of the IO and/or the Consultant. The chance that there would be a conspiracy between the MC, bidders and the Consultant to artificially inflate the price of the Project would be lowered. Mr Yeung deposed that blind tender prevents corruption and favouritism because bidders would not know each other, the address of the Building and thus the IO.

(2)  The allegation that the MC’s decision to adopt blind tender was not disclosed to owners of the Building is denied. Owners were informed of the MC’s decision by the MC meeting minutes, displayed continuously for no less than 7 days in a conspicuous location within the building following paragraph 10(4B)  of Sch. 2 of the BMO. There is no evidence that the minutes were not disclosed to owners. 

107.  The IO denies a blind tender leads to price inflation:

(1)  There is no evidence that blind tender systematically inflates the price of all bids. Arguing that site visits would enable bidders to offer a more competitive price is speculation.

(2)  The Respondents sought to rely on the wide range of bid price to argue that the blind tender caused contractors to bid at an inflated price. However, that argument is premised on the false assumption that the lowest bids in the range of HK$22M are still overpriced, when there is no evidence to support that claim. All bidders were well informed of the detailed requirements of the renovation project and were given sufficient information to quote. The tender documents were prepared by the Consultant, a registered person. Special Construction Specifications, scaffolding guidelines, material list and drawing plans were all part of the Tender Documents provided to them. The Inspection Report provides photographs, identifying each and every defect in the common parts that required repair.

(3)  In any event, even if it is accepted that blind tenders would lead to higher bidding prices, it is difficult to see how the MC’s adoption of a blind tender proves that there was a conspiracy by the Scammers. Quite the contrary, the wide range of bidding price tends to show that the bidders had not collaborated or colluded in the process. 

108.  Mr Young refutes the suggestion that blind tender prevents collusion and bid-rigging. He says that when the suggestion of “blind tender” arose it indicated “planning a scam”. Blind tender has no benefit for the owners. It is a means to exclude bone fide tenderers putting in genuine tenders. And for the insiders to organise whatever pricing to show owners they decide, not a real price, to steer the owners towards a certain tender. Then the hijackers in control of the IO have the audacity to use the courts to sue owners on a fictional tender and sky high price contract. The owners have been cheated. I accept that the pros and cons of a blind tender may be debated. However, it has not been established that the blind tender deterred bone fide tenderers from participating and tendering for the Project. I am not satisfied that the blind tender caused inflated prices or facilitated the dishonest scam alleged.

109.  The IO also replies that there is nothing unusual in a tender being handled by solicitors. Mr Yeung said that the matter was handed over to the solicitors because the IO believes that lawyers would be more impartial. They could ensure that the Tender Exercise would be fair and just. In my view there is nothing untoward in the solicitors’ involvement, save for locating the tender box contrary to the Code.

110.  Rs’ Closing raised a further unpleaded ground to infer the existence of such an agreement. They allege that the fee charged by the Consultant for the Project was unreasonably low for years of work, so it must have an agreement to share profit with the Contractor. However:

(1)  No evidence was adduced to show that HK$50,000 was lower than market rate for a Project of this scale and nature.

(2)  Evidence shows that 2 firms offered to act as the Project consultant for around HK$30,000. Another 7 firms offered to do the job for HK$50,000 to $60,000. The prices demonstrate that the consultancy fee charged by the Consultant fell within the range charged by other firms.

111.  An alternative proper consultant’s fee has not been established. I find that, given the fees offered by other consultants, it cannot be inferred that the Consultant’s fee is unreasonably low. There is no evidence at all that the Consultant had an agreement to share in the profit with the Contractor, or with anyone else.

112.  Another unpleaded ground is the Respondents’ allegation that neither the Contract nor the Tender were legally binding because they were not properly signed, which the IO refutes as follows:

(1)  The Tender form was duly signed by the Contractor:

(i)  As shown at p. FT/1 of Exhibit R-4, the Contractor stated that they are willing to execute and complete the Project for a consideration of HK$23,872,750.Right next to that confirmation, a company chop of the Contractor was stamped, confirming the Contractor’s clear intention to make the statement.

(ii)  On p. FT/2 of Exhibit R-4, the Contractor filled in its full company name, address, contact number, fax number, email address, and registered number. The signature of the Contractor was at the top of that page together with a company chop. Another company chop was stamped next to the line “Seal” as well.

(iii)  Thus, the intention of the Contractor to submit the bid and be bound by it is clear and unambiguous. It is immaterial that the signature of the Contractor was not precisely on the line of “Signature of Legal Representative or Authorised Representative”. 

(iv)  Furthermore, paragraph 4 made clear that “once accepted by the Employer within the validity period, this tender shall constitute a valid contract and shall be binding on both parties”. Since the IO has accepted the bid from the Contractor, the tender must be binding on both parties.

(2)  The Contract was also properly signed and is legally binding:

(1)  Page i of Exhibit R-4, titled “Articles of Agreement”, is the first page of “Hong Kong Minor Works Standard Form of Contract”. On Page ii the Chairman, the Secretary of the MC, the director of the Contractor and two witnesses signed. Both the IO and the Contractor stamped their chops there. It cannot be disputed that the parties have made clear that they agreed to be bound by the Contract.

(2)  Rs’ Closing refers to the Guidance Note of the “Hong Kong Minor Works Standard Form of Contract” and argued that the Contract was not signed. It provides guidance to parties on how to sign and execute the contract. The area for signature was merely the “Recommended signing and sealing format”, not the designated area for signature of the Contract.

113.  I have considered all submission and the evidence. I accept the above submissions of the IO. I find that the Tender and the Contract were duly signed and that the terms of the Contract were agreed by the Contractor and the IO.

114.  Mr. Yeung was questioned extensively as to why the last instalment payment was made to the Contractor 21 months after the completion date on 5 July 2020. The IO is the employer of the Project. It relied on the expertise of the Consultant, who is a registered person. The Consultant was responsible for the assessment of the works and payment certificates. Only the Consultant is able to explain why there was a time lag between the completion date and the last installment payment. The IO is not in a position to comment, save noting that the Contractor had not complained about delay in payment. I do not consider the time lag is evidence from which it can be inferred that there was a scam. It is not unusual for there to be payment delays at the end of a project. Mr Yeung referred to the retention period, but the point was taken too late for the IO to be able to revert to the Consultant for evidence. I do not take this matter into account against the IO.

115.  The Respondents then sought to rely on the Contract terms to prove that the payment was late. The IO replies that:

(1)  The Respondents cannot have two bites of the cherry. They cannot on one hand allege that the Contract was not legally binding, and on the other hand argue that the last payment was late with reference to the Contract. 

(2)  In any event, the Respondents erred in relying on Clauses 4.3.1 of the Contract. That clause only stipulates the time within which interim payment certificates should be issued. It has no relevance to the final assessment by the Consultant and the release of retention money.

(3)  Rs’ Closing also misconstrued Clause 4.4.1. The clause provides that the Contractor shall provide all documents necessary for the calculation of the actual contract price for final verification by the Consultant within three months from the Completion Date. It does not shed light on the time the Consultant has under the Contract to assess the status of the Project and to issue a certificate confirming the date of completion of the rectification stated under Clause 2.5. 

(4)  Taking the Respondents’ case at the highest, it is one of contractual breach by the Consultant. It is difficult to see how that proves the alleged conspiracy by Scammers. 

116.  I find that the IO has properly construed the Contract terms. The IO may have misconstrued the Respondents’ point. They do not suggest the Contract was binding, rather they rely on the facts as further evidence that there was no such binding Contract, if there had been, the payments would be in accordance with those Contract terms. Either way, it does not assist to establish the conspiratorial agreement alleged.   

117.  Rs’ Closing claims that Mr. Yeung’s refusal to confirm the completion date of the Project indicates that he has “ulterior motives”. The IO considers the criticism unfair. I accept that Mr Yeung did not refuse to confirm the completion date of the Project. He would have to refer to the relevant documents. The giving of evidence is not a memory test. It is not unreasonable for Mr Yeung to forget the precise date of the Project completion. That per se does not imply the existence of any conspiracy amongst the Scammers.

118.  The Respondents further accused the IO of giving the Contractor an exclusive privilege to reduce its bid price when the other contractors were not given such opportunity and that only the Contractor was given the opportunity to reduce HK$800,000 worth of pre-existing construction work from the bid price. The IO objects to the allegations being raised for the first time in Rs’ Closing. Their failure to plead the allegations has deprived the IO of an opportunity to refute them by documentary evidence. In any event, they are based on mere conjecture, unsubstantiated by any evidence. The fact that only the Contractor reduced its bid price does not mean that only the Contractor was given the opportunity to. It may simply be that the other contractors choose not to do so. I accept the IO’s objection. The IO is prevented from producing correspondence between the IO and all contractors to disprove the Respondents’ allegations. I disregard the latterly raised allegations.

119.  Another unpleaded matter, first raised in Rs’ Closing, is that the Contractor had erected scaffolding in the Building. The IO questions how that would advance the Respondents’ conspiracy case:

(1)  All bidders were given the same detailed set of Tender Documents prepared by the Consultant. They were on the same level playing field.

(2)  The Project required repair works particulars must be illustrated in detailed drawing plans and comprehensive reports, as contained in the Tender Documents. To suggest that the Contractor would know better about the Project and even the details of the tender (before bids are open)  just by conducting separate emergency work over a particular area of the Building is mere speculation.

(3)  This new allegation is inconsistent with the Respondents’ case of price-rigging. Price-rigging refers to the situation where parties conspire to fix or inflate prices at the expense of consumers. If one of the contractors had utilised the advantage of having previously worked on the Building in bidding, such behaviour would be pro-competition and would tend to show that there was no agreement amongst the 18 bidders to fix the price of the Project.

(4)  It is equally far-fetched to suggest that the matter is suggestive of an agreement between the Scammers (including all 18 bidders)  to defraud owners of the Building. It appears to the IO that the Respondents were merely dissatisfied with the bidding outcome, wishing that the lowest bid could have been even lower.

120.  In my view the fact that the Contractor may have been able to take advantage of special knowledge would tend to go against the idea that all bidders combined to tender at inflated prices. This is not a matter from which the combination or conspiracy is to be inferred.

121.  Insofar as the allegations addressed under Issue 1A are relied on by the Respondents to prove the alleged conspiracy, for the reasons stated thereunder they do not assist the Respondents.

122.  The Respondents maintain that they, and other owners, are the victims of a scam or fraud. Mr Young clearly believes that the price for the Project was inflated. Further, that works were included in the Project that did not need to be done or not as charged and works were of a poor standard. Mr Young has had decades of experience in the property market and is very familiar with old properties. Mr Young has left no stone unturned. He has drawn all the available threads together. However, there is simply insufficient evidence of dishonesty or an agreement or combination, between anyone involved, causing loss.  The Respondents have not established that the sum charged was excessive or inflated, by reference to particular items, rates or otherwise, that unnecessary items were included or that absence of original documents or substandard works would imply another contractor performed the works.

123.  Accordingly, for reasons stated above, the Respondents’ conspiracy case is not established. They have no defence to the IO’s claim. In answer to Issue 5, it has not been proved that the IO had been “hijacked” by “bid rigging scamers”, using the IO machinery for the false tender exercise or to trick owners to pay for a Project at an inflated price. Issue 6 does not arise. The Respondents’ liability to contribute to the costs of the Project remains.

124.  With the growing number of aged buildings in need of repair and owners’ increasing concerns about how decisions on major building maintenance are made, the Administration addressed some of the concerns in the Building Management (Amendment)  Ordinance 2024, which came into operation on 13 July 2025.  The Administration is aware of “bid-rigging” and other dishonest practices that have occurred in the market. It may be of little comfort to the Respondents, but that is one of the concerns addressed by the amendments to the BMO.

Issues 8 & 9: Whether R8 and R9 are liable for interest

125.  Pursuant to Clauses 4(i)  of the DMC, all owners are liable to pay default interest for outstanding sums due:

“(i)  If any owner shall fail to pay any amount payable hereunder within 7 days of the date on which the demand for payment is served on him he will further pay to the Manager interest calculated at the rate of HK$1.50 per HK$100.00 or part thereof of the amount unpaid for each period of 30 days or part thereof for which it remains unpaid.”

126.  In Incorporated Owners of So Tao Centre v Lam Kong Wan(Unrep., CACV 158/2007, 12 December 2007), the trial judge refused to award default interest at the rate as provided in the DMC. The Court of Appeal reversed the decision holding that the incorporated owners’ claim for interest is based on its contractual entitlement. It is entitled to that interest as of right. The discretion of the Court does not arise (§8). The Respondents are liable to pay default interest.

127.  Accordingly, the IO is entitled to and does claim interest on the outstanding repair costs from R8 and R9 at the rate specified in Clause 4(i)  of the DMC.

128.  The R8 and R9 NOO denied liability for interest as claimed. Rs’ Closing does not reply to the IO’s interest claim. I find that the IO is entitled to interest at the rate specified in Clause 4(i)  of the DMC on the outstanding repair costs due from R8 and R9.

129.  The total overdue interest payable by R8 and R9 up to 7 February 2025 calculation is at Annex 1 to the IO Closing Submission:

Respondents	Amount of overdue interest at 7 February 2025
R8	HK$387,174.05
R9	HK$637,698.43

130.  In answer to Issues 8 and 9, I find that the IO is entitled to interest pursuant to Clause 4(i)  and (k)  of the DMC to be paid by R8 and R9 on the unpaid amounts due. The Respondents shall pay interest on the sums due in accordance with the DMC calculated to date of judgment. Thereafter the IO shall have judgment rate interest.

131.  For the reasons set out above I find that the IO has proved its case. The Respondents have not established a defence to the IO’s claim. The defences raised by R8 and R9 are dismissed. The IO is granted the relief sought against R8 and R9.

ORDER

132.  I order that:

(1)  The 8^th Respondent do pay the Applicant the sum of $437,484.80.

(2)  The 9^th Respondent do pay the Applicant the sum of $720,563.20.

(3)  The 8^th Respondent and the 9^th Respondent do pay interest pursuant Clause 4(i)  of the DMC at the rate and calculated as stated therein to the date of judgment.

(4)  The 8^th Respondent and the 9^th Respondent do pay interest at judgment rate from the date of judgment until payment. 

COSTS

133.  I see no reason to depart from the starting point that costs follow the event. I make a costs order nisi that the 8^th  Respondent and the 9^th Respondent do pay the Applicant its costs of the proceedings to be taxed on the District Court scale, with certificate for counsel. Any party may apply to vary the nisi order within 14 days hereof, failing which the nisi order shall become absolute.