THE INCORPORATED OWNERS OF SWISS TOWERS v. CHOW YUM WAH

CACV 122/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 122 OF 2006

(ON APPEAL FROM LDBM 207 OF 2005)

______________________

______________________

__________________________________

REASONS FOR JUDGMENT

__________________________________

Hon Cheung JA (giving reasons for judgment of the Court) :

1. We dismissed the respondent’s appea1 against the decision of H H Judge Yung sitting as the Presiding Officer of the Lands Tribunal.  These are our reasons. 

The background

2. Swiss Towers is a residential complex consisting of multi-storey buildings.  The owners had formed a corporation namely, the applicant in this case.  The management and maintenance of Swiss Towers are governed by the Building Management Ordinance (Cap. 344) (‘BMO’).  In this case the applicant sought to recover from the respondent Mr. Chow Yum Wah (‘Mr. Chow’) its former chairman the sum of $17,500. 

3. The Management Committee of the applicant at a meeting held on 17 March 2004 awarded this sum to Mr. Chow as entertainment expenses.  As recorded in the minutes of that meeting Mr. Chow informed the Management Committee that he had donated this amount to a charitable organization called Project Hope to be used as scholarship for underprivileged students in the Mainland.  The donation was made by Mr. Chow in the name of the applicant.  According to the evidence, previously in 2003 the Management Committee had also awarded a sum of $14,400 to Mr. Chow as entertainment expenses.  He had also donated this amount as scholarship.  Apparently payments had been awarded to Mr. Chow in this manner for many years.

4. The minutes of the meeting of 17 March 2004 further recorded that the payment to Mr. Chow would be ratified and approved in the annual general meeting of the applicant. 

5. At the annual general meeting of the applicant held on 24 March 2004 the owners objected to the payment of $17,500 to Mr. Chow.  A resolution was passed by the owners to that effect.

6. The applicant then commenced the present proceedings against Mr. Chow to recover the $17,500.  The claim was allowed by the judge.  Mr. Chow appealed. 

Section 18(2)(aa)

7. In our view there is only one basis in which this sum can be given by the owners of Swiss Towers to Mr. Chow and that is under section 18(2)(aa) of the BMO which provides

‘a corporation may, in its discretion, pay the chairman ............ such allowance as may be approved by the corporation by resolution passed at a general meeting, in accordance with, but not exceeding, the maximum allowances specified in the 4th Schedule.’

8. In this case, whether the sum of $17,500 is within the maximum allowances specified in the 4^th Schedule is not in issue.  What is important is that the resolution to pay this sum to Mr. Chow was not made at a general meeting of the corporation but only at a meeting of the Management Committee of the corporation.  In any event the owners at the general meeting had disapproved of the payment of this sum to Mr. Chow.  Hence Mr. Chow cannot rely on section 18(2)(aa). 

Section 18(2)(g)

9. Mr. Wu, counsel for Mr. Chow, seeks to avail himself of section 18(2)(g) of the BMO which provides, 

‘A corporation may, in its discretion, act on behalf of the owners in respect of any other matters in which the owners have a common interest.’

10. This is the only point relied upon by Mr. Chow in this appeal.  The arguments proceeded like this : section 29 of the BMO empowers the Management Committee to exercise the powers of the corporation on its behalf.  Mr. Chow had made a donation in the name of the applicant to a charity in the Mainland.  This was done on behalf of the owners.  The donation enhances the images of the applicant and this image is a matter in which the owners have a common interest. 

11. In our view this argument does not avail Mr. Chow.  The argument was on the basis that the corporation itself made a donation to a charity in the Mainland.  This was not how the matter proceeded because what was asked was for the money to be paid to Mr. Chow as his entertainment expenses.  He chose to donate it to charity, which no doubt is a laudable gesture, but the fact remains that the payment was made by the applicant to him as entertainment expenses.

12. In any event the section is not applicable.  The purpose of the BMO is to facilitate the incorporation of owners of flats in buildings to provide for the management of their buildings and for matters incidental or connected with such a purpose.  This is apparent from the long title of the BMO.  Section 14(1) of the BMO further provides that

‘.... 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.’

13. All this points to the fact that a corporation is set up for the specific purpose of managing the buildings.  The words ‘any other matter in which the owners have a common interest’ in section 18(2)(g) must be read in that light.  They must be referable to the management and maintenance of the buildings and matters relating to such purposes.  They do not extend to making charitable donations to the Mainland in the name of the corporation.  The Management Committee has no power to act on behalf of the owners in making such donations.  This is a point that, in our view, does not require further elaboration. 

14. Furthermore, the resolution of the 17 March 2004 was expressly stated to be subject to the ratification and approval of the owners.  Hence even if the Management Committee had the power to represent the owners, the owners had clearly disapproved the payment.

15. The two cases cited by Mr. Wu do not assist him at all.  Godfrey JA in Incorporated Owners of Block F1 – F7 Pearl Island Holiday Flats v. Incorporated Owners of Pearl Island Garden [1997] 4 HKC 424 did not advocate a broad or narrow approach to the construction of section 18(2)(g).  He merely stated that it was not right to impose a narrower construction of that section to the one which had been given by the judge at the first instance in that particular case.  Both that case and Incorporated Owners of Mirador Mansion v. Tecowin Development Limited H.C.A. No. 4069 of 1996 were obviously concerned with matters which affected the ownership and management of the buildings and not something extraneous to them.

16. We recongize that there may be occasions when corporations like the applicant may consider that as members of the local community they should support activities which concern the community by way of financial contribution.  We can see examples such as local street festivals, gifts to the elderly during traditional festivals and natural disaster relief funds.  We would reserve the question whether this could be validly done by a corporation in an appropriate case.  

Conclusion

17. Accordingly the judge was correct in his decision and we dismissed the appeal with costs to the applicant.