LEUNG HO SING AND OTHERS v. SHUM YIU TUNG AND OTHERS

CACV 108/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO.108 OF 2006

(ON APPEAL FROM LDBM 153 OF 2005)

______________________

------------------------------------

REASONS FOR JUDGMENT

------------------------------------

Hon. Yeung JA:

1.  I agree with the reasons for judgment of Yuen JA.

Hon Yuen JA:

2.  On 18 July 2005 we heard an appeal from a judgment of Deputy Judge Michael Y.M. Wong (sitting as a Presiding Officer of the Lands Tribunal) given on 15 February 2006.  At the conclusion of the hearing, the appeal was dismissed with an order that the 6^th Applicant   pay the costs of the appeal on an indemnity basis.  My reasons appear below.

3.  Before the Tribunal, the 6^th Applicant (who was the only applicant still pursuing the application by that time) was not legally represented and the judgment was given in Chinese.  All parties are now legally represented and counsel asked to conduct the appeal in English; these reasons for judgment are accordingly written in English.

Background

4.  The 6^th Applicant is an owner of a unit in a building.  The Respondents are respectively the chairman, vice-chairmen, treasurer and secretaries of the 11^th Management Committee of the building.

5.   The 11^th Management Committee comprises a total of 9 members, including the Respondents, but the other members were not made parties to the application before the Tribunal.  Nor was the Incorporated Owners made a party.  This has a significant bearing on the conduct of the case and this appeal, as I shall discuss later. 

6.  To return to the disputes before the Tribunal, the 11^th Management Committee was appointed on 20 November 2002 but remained in place at the time when proceedings in the Tribunal were commenced on 10 June 2005.  This was because at an AGM held on 14 April 2005 there was a lengthy discussion about building repairs, and after a 2-hour session the AGM was adjourned without a vote being taken for appointing a new Management Committee.  This was one of various complaints made by the 6^th Applicant in the application.

Proceedings in the Lands Tribunal

7.  The 6^th Applicant sought orders (amongst others) that an administrator be appointed by the Tribunal under s.31 Building Management Ordinance ("BMO"), that a new Management Committee, the 12^th Management Committee, be appointed and for an injunction restraining the Respondents from being re-appointed to the 12^th Management Committee.

8.  The Respondents denied the 6^th Applicant’s allegations but more importantly took up the Presiding Officer’s point, raised at the hearing, that necessary parties had not been joined, viz. the other members of the Management Committee and the Incorporated Owners ("IO").

Failure to join parties

9.  In Wong Wai Chun v Shing Sau Wan CACV 173/2004, unrep., this court(Cheung, Yuen JJA and A. Cheung J) had held that the nature of the relief sought in that case required the IO to be made a party because it would obviously be affected by the relief sought. 

10.  In the present case the Presiding Officer held that similarly the IO (and the other members of the Management Committee) would be affected by the relief sought in the application and should have been joined.  In my view, that holding was clearly right and it was not challenged in the grounds of appeal. 

11.  However the 6^th Applicant made no attempt before the hearing of the appeal to join the other members of the Management Committee or the IO as parties.  The absence of a proper party is not a mere procedural irregularity - it is a matter of substantive rights.  The purpose of having the right parties before the court is so that they can all be heard and their positions taken into account before a decision and order affecting them is made.  Whilst it might be assumed that the other members of the Management Committee might share the same stand as the Respondent members, the IO is a separate party from the members of the Management Committee, and a solicitor instructed for it is obliged to consider its rights and interests separately from those of the Management Committee.     

12.  Accordingly in the absence of the other members of the Management Committee and the IO, the appeal was not competent. 

13.  When Counsel for the 6^th Applicant was faced with that point at the commencement of the appeal, he argued that he no longer sought an order for the appointment of an administrator and that therefore it was not necessary for the IO to be a party.  However  he later accepted that the IO would nevertheless be affected by the orders he sought on appeal.  He then asked for the appeal to be adjourned so that he could join the IO (and presumably the other members of the Management Committee) as parties. 

Are there merits in this appeal?

14.  In considering whether to take that course, we needed to consider whether there were any merits in the appeal.  We concluded that there were clearly none. 

15.  The 2 arguments of law raised by the 6^th Applicant were:

(1) whether the Management Committee could continue to hold office after the AGM on 14 April 2005, as para. 5(1) of the Second  Schedule of the BMO provides:

“(1) ... at every alternate annual general meeting, all members of the management committee, ... shall retire from office”;

and

(2) whether the Chairman was required to convene a general meeting upon receiving a request from 5% of the owners, even though the present proceedings had commenced, because para. 1(2) of the Third Schedule of the BMO provides:

“The chairman of the management committee shall convene a general meeting of the corporation at the request of not less than 5% of the owners for the purposes specified by such owners within 14 days of receiving such request”.      

Construction of para. 5(1)

16.  As for the 1^st argument, as the meeting of 14 April 2005 ended without a vote appointing a new Management Committee, it is clear that the members of the 11^th Management Committee could not retire until new members of an incoming Management Committee were appointed to take their place.  For the members of a management committee to retire without new members being appointed would be to leave a lacuna in the management of the building.  This court (Leong CJHC and Woo JA, Cheung JA dissenting) has held in The Incorporated Owners of Finance Building v Bright Hill Management Consultants Co Ltd CACV 386/2000 that that could not possibly be the intention of the legislature and that decision is binding on us. 

17.  I am also of the view that the decision of the majority in Bright Hill is clearly right.  Whilst it is true that para. 5(1) says that the members “shall retire”, that paragraph should be read in context.  The context is that it is followed by para. 5(2) which provides:

“(2) At an annual general meeting of a corporation at which the management committee retires under sub-paragraph (1) the corporation shall, in accordance with this Ordinance, appoint –

(a) a new management committee ... [etc]”.

18.  In other words, what is envisaged is an immediate succession of the retiring management committee by the incoming management committee – with no ‘interregnum’.  This is confirmed by para. 5A of the same Schedule which provides for retiring members to physically hand over documents to the incoming management committee within a short period of time.  The intention of the legislation is that there would be no period where the building would lapse into a state of ‘anarchy’. 

19.  The 6^th Applicant argued that para. 5(1) should be construed as having the effect of compulsorily retiring a management committee at the end of the meeting on 14 April 2005 if the meeting was adjourned sine die, but not if the meeting was adjourned to a specific date.  That argument has no basis in law or in logic. 

20.  Of course if a management committee which is due to retire deliberately delays the procedure for voting in a new committee, the owners have certain remedies under the BMO.  But until a new management committee is voted in, there is nothing in the BMO that has the effect of compulsorily retiring the incumbent management committee, thereby leaving a void. 

21.  In his judgment, the Presiding Officer found that the 11^th Managing Committee had in fact resolved on 6 June 2005 to hold another general meeting on 18 July 2005 and that it did not deliberately delay the procedure for voting in a new committee (para. 17).  That is a finding of fact from which there can be no appeal.  The 6^th Applicant’s argument in this court that the Respondents acted in bad faith is out of order. 

22.  In fact, the reason why a meeting was not held on 18 July 2005 was because of the relief sought in the 6^th Applicant’s application to the Tribunal filed on 10 June 2005.  

Effect of application to Tribunal on meeting

23.  This leads me to the 2^nd argument which Counsel for the 6^th Applicant said would stand or fall with his 1^st argument.  If that is the case, then the 2^nd argument would fail in any event. 

24.  Be that as it may, with respect to the Presiding Officer, I do not think that a request for the convening of a general meeting must be addressed and delivered personally to the chairman.  It would be adequate if it is addressed to the Management Committee of which the chairman is a member, and delivered where it can reasonably be expected to reach him.  Having said that, the prudent practice must be to deliver the request to the chairman personally, as para.1(2) of the Third Schedule provides for the time frame to convene a meeting to be calculated from the date when he "receives" the request, and personal delivery would enable precise calculation of the deadline.  In the present case the 1^st request was dated 19 May 2005 and the Management Committee met on 6 June 2005 (18 days later) and resolved to call a general meeting to be held on 18 July 2005. 

25.  There might have been some validity in the 6^th Applicant’s argument that the chairman had failed to convene a meeting within 14 days of receipt of the 1^st request if not for the fact that in its application to the Tribunal lodged on 10 June 2005, it had asked for an injunction restraining the Respondents from standing as candidates for the 12^th Management Committee.

26.  Counsel for the 6^th Applicant argued that the injunction had not been sought as a remedy.  This argument was advanced notwithstanding the clear wording of the Notice of Application and the understanding of the parties and the Presiding Officer.  The argument was, I regret to have to say, at best misguided and at worst disingenuous.

27.  The effect of the application for an injunction was significant.  The Respondents have a prima facie right in law to be eligible for re-appointment.  Paragraph 5(3) of the Third Schedule of the BMO provides:

“Members of the management committee who retire under sub-paragraph (1) shall be eligible for re-appointment under sub-paragraph (2)”.   

However in view of the 6^th Applicant’s pending application to the Tribunal, the Respondent’s position became contingent upon the Tribunal’s decision.  Until that application was resolved, the holding of a meeting to vote in the 12^th Management Committee would have been futile, because it would not be known to the owners attending the meeting whether the Respondents would be eligible to be re-appointed or not, and that would impact directly on what could or could not be resolved at the meeting.

28.  In those circumstances, even if there had been a breach of para. 1(2) of the Third Schedule, a tribunal would not have granted any relief. 

29.  Accordingly there were no merits in the appeal in any event and there was no purpose in granting leave to join the other members of the Management Committee and the IO as parties.  The appeal was accordingly dismissed.

Scale of costs

30.  As for the scale of costs, this appeal should never have been prosecuted in the absence of the IO and the other members of the Management Committee.  It was incompetent from the start and I am sorry to have to say that the arguments advanced on behalf of the 6^th Applicant during the hearing only served to reinforce the Respondents’ application that this was an appropriate case for costs to be ordered on the indemnity basis. 

Hon Tang JA:

31.  I agree.