CHAN CHUN MAO v. WONG MING KWONG AND OTHERS

[English Translation – 英譯本]

LDBM 178/2004

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

 BUILDING MANAGEMENT APPLICATION
 NO. 178 OF 2004

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Dates of Hearing: 8 September 2004, 28 October 2004, 11 November 2004, 11 January 2005 and 12 January 2005

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JUDGMENT

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1. The Applicant Mr Chan Chun Mao (陳松茂) (hereinafter “Mr Chan”) was a member of a management committee of the Owners Incorporation of Blocks F1-F7, Pearl Island. The Owners Incorporation convened an annual general meeting on 23 April 2000. No such meetings were held from 2001 to 2003. The Owners Incorporation convened another annual general meeting on 6 June 2004, at which a new management committee was elected.

2. Mr Chan takes the view that the meeting was not held under lawful circumstances and that the new management committee was unlawfully elected at that meeting and therefore does not have a legal status.

3. In his Re-re-amended Notice of Application, Mr Chan set out the following grounds in purported support of his claim that the annual general meeting was unlawful:

First, Mr Chan claimed that the annual general meeting was convened by certain individuals among themselves and that the management committee at that time did not have knowledge thereof.

Second, Mr Chan had not been served with a notice of meeting at least 14 days prior to the meeting, as required by paragraph 2(1) of Schedule 3 to the Building Management Ordinance (hereinafter “the Ordinance”). He claimed that he only received the notice from Mr Wai Heung Wing (衛向榮), a witness for the Respondents, at a meeting of the management committee on 30 May 2004.

Third, he claimed that, for an annual general meeting to be valid, the management committee must submit at the meeting an income and expenditure account and a balance sheet of the owners incorporation signed by the chairman and secretary/treasurer of the management committee, failing which the management committee was not entitled to convene the annual general meeting. Mr Chan further claimed that, as the management committee purported to convene the annual general meeting without submitting the abovementioned two accounting documents to the meeting, the management committee contravened section 27(3) of the Ordinance and the annual general meeting was unlawful or null and void. On the other hand, the Respondents’ position was that the meeting on 6 June 2004 was an annual general meeting as opposed to some other owners’ meeting. Mr Chan went on to claim that, if the management committee failed to submit an income and expenditure account or a balance sheet, then the committee would not be able to operate, as a result of which the Owners Incorporation would have to be liquidated.

Fourth, the meeting in question was inquorate. Paragraph 5(1)(b) of Schedule 3 to the Ordinance stipulates that the quorum at an annual meeting of the owners incorporation shall be 10% of all the owners. Schedule 11 to the Ordinance stipulates that one owner who owns more than one flat is to be counted as only one owner. Mr Chan claimed that the housing estate comprised 224 units but only 21 owners attended the meeting in question, and hence the meeting was inquorate and accordingly unlawful. Mr Chan adduced as exhibit a tape recording which apparently recorded the proceedings at the meeting. Mr Chan further alleged that one of the proxies who attended the meeting, who claimed to represent one Ms To Cheuk Wing (杜卓穎), had in fact not been authorized by Ms To because the signature on the proxy form appeared to have been forged by the proxy.

4. I first deal with Mr Chan’s submission that, in the absence of an income and expenditure account or a balance sheet, an owners incorporation cannot hold an annual general meeting. Section 27(1) of the Ordinance provides that, subject to subsection (3), a management committee shall maintain proper books or records of account and other financial records and shall prepare, not later than 15 months after the date of the registration of the incorporation and thereafter every 12 months, an income and expenditure account and a balance sheet. Both documents shall be signed by the chairman and the secretary or the treasurer of the management committee and shall be laid before the incorporation at the annual general meeting convened in accordance with paragraph 1(1) of Schedule 3.

5. Section 27(3) further provides that, in the event of a contravention of subsection (1), every member of the management committee shall be guilty of an offence and shall be liable on conviction to a fine at level 5 unless he proves (a) that the offence was committed without his consent or connivance; and (b) that he exercised all such due diligence to prevent the commission of the offence as he ought to have exercised in the circumstances.

6. Mr Chan has submitted that, although paragraph 1(b) of Schedule 3 to the Ordinance requires the management committee to convene an annual general meeting not earlier than 12 months, but not later than 15 months, after the date of the first or previous annual general meeting, the management committee is not in a position to hold an annual general meeting in the absence of an income and expenditure account or a balance sheet. In the present case, it was only in 2002 that the Owners Incorporation appointed an auditor to audit its financial documents and prepare the balance sheet and income and expenditure account for that year. No such accounting documents were prepared for the years of 2000, 2001 and 2003.

7. Mr Wai Heung Wing, a witness for the Respondents, told this Tribunal that, as the Owners Incorporation has wasted a large amount of money on the litigation, it does not have sufficient funds to instruct an accountant to carry out the above accounting work and therefore has still not prepared any income and expenditure account and balance sheet for the years of 2000, 2001 and 2003.

8. I do not for a moment agree with Mr Chan’s submissions. A management committee cannot delay an annual general meeting for the reason that an income and expenditure account or balance sheet has not been prepared. Mr Chan wrongly thought that, where an income and expenditure account or balance sheet has not been prepared in time or at all, a management committee may still avoid a contravention of section 27 of the Ordinance simply by delaying the annual general meeting.

9. Paragraph 1(1)(b) of Schedule 3 to the Ordinance governs the time at which an annual general meeting is to be held. The meeting has to be held within the stipulated time and cannot be delayed by reason of an absence of an income and expenditure account or balance sheet. What section 27(1) requires is that a management committee has to prepare the above two accounting documents within the specified time, failing which the committee is in contravention of section 27(1). This position will not be rendered different by delaying an annual general meeting.

10. Further, I am of the view that the question of whether or not the above two accounting documents are submitted at an annual general meeting will not affect the lawfulness or otherwise of the meeting. In the circumstances, I hold that the annual general meeting on 6 June 2004 was not rendered unlawful by the failure to submit an income and expenditure account and a balance sheet at the meeting. I do not agree with Mr Chan’s arguments in this respect.

11. As regards Mr Chan’s submission that the management committee at that time had no knowledge of the need to convene an annual general meeting on 6 June 2004, I accept the evidence of Mr Wai Heung Wing. Mr Wai said that, in the first half of 2004, he and Mr Wong Ming Kwong, the immediate past chairman, made a request to convene an annual general meeting and voted for the same for the reason that the 15-month time limit for convening such meeting had long expired, but Mr Chan (the Applicant herein) and Ms Chow Ying Ling, the then secretary for the Owners Incorporation, opposed the request, arguing that the Owners Incorporation had not properly prepared an income and expenditure account and a balance sheet. 

12. Mr Wai further said that, on 20 October 2003, the Owners Incorporation received from no less than 5% of the owners a request, made in accordance with paragraph 1(2) of Schedule 3 to the Ordinance, that an annual general meeting be held and that a new management committee be elected. On 10 November 2003, Ms Chow Ying Ling, the then secretary for the management committee, issued a written response to the owners who made the above request, asking them to put forward an agenda for the meeting. This, however, is unwarranted because the document requesting the meeting had clearly set out the agenda for the meeting, namely to convene an annual general meeting and to elect thereat a new management committee.

13. On 22 November 2003, Ms Chow issued another letter on behalf of the management committee to all the owners, stating that the request of 5% of the owners for an annual general meeting was misconceived because paragraph 1(2) of Schedule 3 to the Ordinance merely allowed the owners to request a general meeting other than an annual one. Nor did the chairman at that time accede to the request of 5% of the owners by convening any general meeting.

14. The above shows that all the members of the management committee at that time, including the Applicant Mr Chan, were aware of the requests by certain members of the committee and owners of the housing estate for an annual general meeting.

15. I do not agree with the argument by Mr Chan and Ms Chow that paragraph 1(2) of Schedule 3 only allows the owners to request a general meeting other than an annual one. In my view, where the time limit for convening an annual general meeting has expired, 5% of the owners are entitled to request the chairman to convene such a meeting pursuant to paragraph 1(2) of Schedule 3. In the present case, the time limit for holding an annual general meeting had long expired and the management committee had in fact been in breach of its duty under paragraph 3(1)(b) of Schedule 3.

16. Although the Chairman failed to convene an annual general meeting within the prescribed time in response to the request made by 5% of the owners on 20 October 2003, the request still took effect. In the present case, the Respondents relied on the request made by 5% of the owners on 20 October 2003 as a basis upon which Mr Wong Ming Kwong as Chairman convened the annual general meeting on 6 June 2004. The Respondents claimed that one of the purposes of convening the annual general meeting on 6 June 2004 was to respond to the said request.

17. I also take the view that the Chairman of the management committee should have convened an annual general meeting within 14 days of receiving the written demand, and that it was a contravention of the provision in paragraph 1(2) of Schedule 3 to convene such a meeting after expiry of the time limit. But convening a meeting out of time was still better than refusing to convene a meeting at all.

18. I must also point out that it is the duty of the Chairman of an owners incorporation to convene a meeting upon receiving the request of not less than 5% of the owners. The management committee has no power to decide whether to convene a meeting in response to the request. Therefore, even though the management committee in question had no knowledge whatsoever of the meeting to be held on 6 June 2004, this would not affect the lawfulness of the meeting, simply because no prior approval of the management committee was needed for the meeting.

19. Furthermore, under paragraph 1(1)(b) of Schedule 3, to convene an annual general meeting is an obligation that a management committee must perform, and it is a contravention of paragraph 1(1)(b) of Schedule 3 for the committee to decide whether to hold such a meeting punctually or at all. As the annual general meeting in the present case was arranged by the Chairman and some of the members of the management committee for the time being, I am of the view that, apart from being held by the Chairman in response to the request made by 5% of the owners on 20 October 2003, the meeting was also held by the management committee in discharge of its obligation under paragraph 1(1)(b) of Schedule 3.

20. As regards service of the notice of meeting, Mr Chan claimed that he did not receive the notice until 30 May 2004 at a meeting of the management committee. Mr Wai, on the other hand, said that the immediate past Chairman Mr Wong signed the notice of meeting on 20 June 2004 and that on 22 May 2004 Mr Wong and a manager named Wong Ah Mun (黃亞敏) inserted the notice into the letterboxes of all units at the housing estate. This method of serving the notice of meeting was in accordance with paragraph 2(1A)(c) of Schedule 3.

21. I accept Mr Wai’s evidence. Given he was keen on convening the annual general meeting and he knew that Mr Chan and Ms Chow were opposed to the meeting, he should have followed the relevant statutory regulations with care. Mr Wai’s evidence was candid and direct. Mr Wai has also submitted to the Tribunal a written statement of Ms Wong Ah Mun in support of what she said. I accept Mr Wai’s evidence.

22. Mr Chan also told the Tribunal that he did not reside in the unit that he owned at the housing estate and that he went to the housing estate to check the letterbox of his unit about once a week. I would not have been surprised if for this reason he did not receive in time the notice of meeting that Mr Wai and Ms Wong Ah Mun had put in his letterbox. In my judgment, with the assistance of Ms Wong Ah Mun, Mr Wai duly served the notice of meeting on the letterbox of each and every unit at the housing estate on 22 May 2004.

23. Finally, in respect of the quorum of the meeting, paragraph 4 of Schedule 3 provides that, at a meeting of an owners incorporation, an owner may cast a vote personally or by proxy; paragraph 5(1)(b) provides that the quorum at a meeting of the incorporation shall be 10% of all the owners; paragraph 5(2) provides that, in determining whether the meeting is quorate, a proxy appointed under paragraph 4 to attend and vote on behalf of an owner at the meeting shall be treated as being the owner present at the meeting; paragraph 9(a) provides that, for the purposes of paragraphs 1(2) and 5, the references in those paragraphs to a percentage of the owners shall be construed as references to the total percentage of the number of owners without regard to their ownership of the percentage of the total number of divided shares of the relevant building.

24. The housing estate in the present case comprises 224 units. 26 owners own two units and one owner owns three units, which means that 28 units are owned by those who own more than one unit. On a calculation pursuant to paragraph 9 of Schedule 3 and Schedule 11, there are only 196 owners at the housing estate. As it is Mr Chan’s case (and also shown by his tape recorded evidence) that 21 owners were present at the commencement of the meeting in question, this in itself is sufficient to refute Mr Chan’s argument that the meeting was inquorate.

25. As a matter of fact, among those 21 owners, at least two were also holding proxy forms signed by other owners; in other words, those two owners were also attending the meeting as proxies. In the end, they were both elected to the new management committee. In my judgment, therefore, when the meeting commenced, at least 23 owners were present either personally or by proxy.

26. The Respondents advanced another argument: 22 owners attended the meeting personally and 8 owners attended the meeting by proxy. Of those 8 owners, 4 were also owners. This would mean a total of 26 owners were present at the meeting and a total of 30 owners were attending the meeting personally or by proxy. Mr Wai adduced a list of signatures of attendees in support of the above argument. Mr Chan did not agree, saying that two of the persons in the said list – namely Mr Wong Ming Tak (黃明德) and Mr Mo Kai Ming (巫啟明) – were in fact not present at the meeting and that the proxy form in respect of Ms To Cheuk Wing was forged and hence should not be accepted.

27. My holding above that at least 23 owners were present at the meeting either personally or by proxy has not counted Mr Wong Ming Tak, Mr Mo Kai Ming and the proxy for Ms To Cheuk Wing. Furthermore, given the quorum was 20 and I have held that at least 23 owners were present, the meeting was lawful. It is therefore not necessary for me to consider Mr Wai’s evidence in this respect.

28. Mr Chan has put forward another argument, namely that an owner who attends a meeting personally cannot stand proxy for another owner at the same time. I reject this argument, which is without substance. Even if the argument were accepted, there would still have been 21 owners at the meeting and this would have met the statutory minimum requirement, i.e. a quorum of 20.

29. In conclusion, I dismiss Mr Chan’s application as he has failed to prove that the annual general meeting held on 6 June 2004 was unlawful. I further rule that the mew management committee elected at that meeting has replaced the previous management committee with effect from the date of the meeting and that the new management committee are given all the rights and duties necessary for performing its functions.

30. I make an order that the Applicant Mr Chan is to pay costs of the Respondents in this application, such costs to include Counsel’s fees as it was in my view appropriate for the Respondents to instruct Counsel to deal with the matter.  The costs are to be taxed on the District Court scale.