The Incorporated Owners of Finance Building v. Bright Hill Management Consultants Co. Ltd.

CACV000386/2000

CACV 386/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 386 OF 2000

(ON APPEAL FROM LDBM 153 OF 2000)

Coram: Hon Leong CJHC, Woo and Cheung JJA in Court

Date of Hearing: 13 November 2001

Date of Judgment: 29 November 2001

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J U D G M E N T

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Hon. Cheung JA:

History

1.This case is concerned with the dispute between the owners in a building called Finance Building ("the Building") situated at No. 254-256, Des Voeux Road, Central, Hong Kong. The Building has been in existence since at least 1979. On 10 July 1979, a Deed of Mutual Covenant ("DMC") was registered in respect of the Building in the Land Registry.

2.The Appellant, Bright Hill Management Consultants Company Limited ("Bright Hill") became the owner of Unit C of the second floor of the Building ("the Property") on 19 January 1996.

3.On 22 July 1996, a general meeting of the owners of the Building was held for the purpose of appointing a management committee so that the owners of the Building might be incorporated into a corporation under the terms of the Building Management Ordinance Cap. 344 ("the Ordinance"). A management committee (the "Management Committee") was duly appointed. On 8 October 1996, the Land Registrar issued a certificate of registration of a corporation pursuant to s. 8(1) of the Ordinance to the Incorporated Owners of the Building ("the Incorporated Owners").

4.In January 1997, the Government informed the Incorporated Owners that there would be mandatory testing of the electrical installation of the Building. The Management Committee met on 12 May 1997 and decided to increase the management fees and management fee deposits and ask the owners for the payment of various contributions for the purpose of setting up funds for the maintenance of the Building and the testing of the electrical installation. By a notice dated 5 June 1997, the Incorporated Owners asked the owners to pay those fees. Bright Hill paid the fees under protest.

5.On 24 September 1997, the Incorporated Owners requested Bright Hill to make further contribution in the sum of HK$3,538. Bright Hill refused to make the contribution on the ground that it was not properly apportioned according to the DMC of the Building and the procedure for the collection was not correct. Since November 1998 Bright Hill had, for the same reasons, further refused to pay the monthly management fee of HK$1,152. To date, 36 months of management fees have been in arrears. The Incorporated Owners had registered two charges at the Land Registry against the Property.

The various applications

6.In 1999, the Incorporated Owners commenced proceedings in the Small Claim Tribunal against Bright Hill. It was discontinued by the Incorporated Owners on 17 December 1999.

7.The Incorporated Owners then applied to the Court of First Instance of the High Court to sell the Property. The proceedings were initiated by way of an originating summons issued on 11 January 2000. The application was opposed by Bright Hill who also issued an inter partes summons seeking

(1) a declaration that the charges were invalid and asking for the charges to be vacated from the Land Registry;

(2) a declaration that the notice of 5 June 1997 was invalid;

(3) return of the overpayment by the Incorporated Owners.

The Lands Tribunal

8.The Deputy High Court Judge, by consent, transferred the respective applications of the parties to the Lands Tribunal. The parties then filed their respective notice of application dated 18 May 2000 and amended notice of opposition dated 1 June 2000 required under the Lands Tribunal Rules. These notices contained the parties' respective claims. Bright Hill's claim was treated as a counterclaim.

9.During the hearing in the Lands Tribunal on 8 June 2000 a representative of the Incorporated Owners admitted that after the incorporation on 8 October 1996 there was no general meeting being held. The Management Committee had met on 12 May 1997 and decided on the collection of contributions and increase of management fees. The Presiding Officer then stopped the proceedings and dismissed the Incorporated Owners' application and Bright Hill's counterclaim. In a brief reasons for judgment, the Presiding Officer stated that :

" On the Applicant's own evidence, there is no longer a validly appointed Management Committee of the Incorporated Owners as at the date of the application, on 18th May 2000.

While the Applicant as a legal person enjoys perpetuity, the Management Committee must step down after a term of 2 years. The members are eligible for re-election to a new committee, but the legal procedures laid down in the Buildings Management Ordinance must be followed.

The Applicant does not have a Management Committee capable of carrying out the functions of the Incorporated Owners. It is not in a position to institute legal proceedings, to accept service and to conduct a defence.

The application is dismissed on the aforesaid grounds.

For the same reasons, the counter claim cannot be dealt with."

10.Bright Hill sought a review of the decision to dismiss its counterclaim. The application was likewise refused. The reasons given by the Presiding Officer were as follows :

"At the hearing of the application, it transpired from the Applicant's evidence that there is no longer a validly constituted Management Committee, through which the Applicant Incorporated Owners can institute legal proceedings, accept service of documents or to conduct a defence. The Applicant has no locus standi.

The application cannot proceed any further in the circumstances. There has not been proper acceptance of service by the Applicant in any event. Although the Respondent representative's affirmation was to stand as the defence and counterclaim, in the order of transfer from the Court of First Instance, it will be a futile exercise to deal with the counterclaim in this situation, even if there is jurisdiction to do so.

The counterclaim cannot proceed. The Lands Tribunal has no jurisdiction on the matter raised in the counterclaim, under the 10th schedule of the Building Management Ordinance Cap. 344.

It must be understood that the transfer of a case from the Court of First Instance to the Lands Tribunal does not confer all the powers of the Court of First Instance to the Lands Tribunal."

The appeal

11.Bright Hill now appeals against the dismissal of its counterclaim.

Jurisdiction of the High Court

12.This appeal is not concerned with whether the High Court has jurisdiction to deal with the parties' respective claims in the first place. The transfer to the Lands Tribunal was by consent. There are a number of conflicting decisions on the jurisdictions of the High Court and the Lands Tribunal. These decisions are :

(1) Winbase Industrial Ltd. & Others v. Mightyton Property Management Ltd. & Another HCA 10232/94 (Mayo J. (as he then was));

(2) Ngan Chor Ying Ann and Another v. Year Trend Development Ltd. and Another HCA 10337/1994 (Findlay J.);

(3) Mass Transit Railway Corporation v. Lam Kai Fai and others HCA 1796/1994 (Yam J.);

(4) Incorporated Owners of Yuen Sun Mansion v. Luk Ngai Ling Irene & Another [1999] 1 HKC 410 (Suffiad J.);

(5) Broadway-Nassau Investments Ltd. v. Lo Yiu Ho and Others HCA 6471/1998 (Mr Recorder Edward Chan S.C.) and

(6) Colliers Jardine Management Ltd. v. Chow Yuk Lan HCA 16082/1998 (Deputy HC Judge Li).

13.It is not necessary to resolve the conflict in this appeal. The matter has to await adjudication in an appropriate case in the future.

Dismissal of the Incorporated Owners' claim

14.The Incorporated Owners has not appealed against the decision dismissing its claim. In this regard, the Presiding Officer was clearly correct. Under paragraph 1(1) of the Third Schedule of the Ordinance, the management committee shall convene─

(a) the first annual general meeting of a corporation not later than 15 months after the date of the registration of the corporation;

(b) an annual general meeting not earlier than 12 months, and not later than 15 months, after the date of the first or previous annual general meeting and

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

15.Under paragraph 3 of the Second Schedule of the Ordinance, the members of the management committee appointed at a meeting convened under s. 3, 3A, 4 or 40C, shall hold office until a new management committee is appointed and assumes office at the second annual general meeting of the corporation. Paragraph 5(1) further provides that :

"At the second annual general meeting of a corporation convened in accordance with paragraph 1(1)(b) of the Third Schedule and thereafter at every alternate annual general meeting, all members of the management committee, other than the member (if any) deemed to be appointed under paragraph 2(2) in his capacity as the tenants' representative, shall retire from office."

16.The Management Committee of the Incorporated Owners was appointed at a meeting held under s. 3 of the Ordinance. The terms of paragraphs 3 and 5(1) of the Second Schedule mean that the office of the members of the Management Committee was only to last until, at the latest, the second annual general meeting of the corporation. This must be conditional upon the Management Committee holding the first annual general meeting, as required by paragraph 1(1)(a) of the Third Schedule, not later than 15 months after the registration of the Incorporated Owners on 8 October 1996. If the Incorporated Owners had in fact not held any annual general meeting after its incorporation, then clearly the authority of the Management Committee had lapsed by 11 January 2000 when it lodged the High Court application or by 18 May 2000 when the Notice of Application was filed in the Lands Tribunal.

17.I do not consider this construction to be contrary to the intention of the legislature. While the Ordinance is aimed to provide for a better management of multi-owner buildings in Hong Kong and ensure that the powers of the corporation are to be performed on its behalf by the management committee, this must be based on the existence of a valid management committee. It is clear that the ultimate power in the management of a building is vested in the corporation itself. S. 14(1) 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. Likewise under paragraph 5(2) of the Second Schedule, it is for the corporation to appoint a new management committee and their office bearers at the annual general meeting of the corporation at which the management committee retires.

18.When there is a valid management committee, the owners should, of course, request the Chairman to convene a general meeting under paragraph 1(2) of the Third Schedule. But when there is none, given the ultimate power is vested in the owners through the corporation, the owners must have the power to convene a meeting for the purpose of appointing a new management committee. These powers are available under S. 3, 3A, 4 or 40C. While the Ordinance also requires the management committee appointed under these provisions to apply for the registration of the corporation, in my view, this is only necessary when there is no corporation in existence. When such a corporation already exists, the management committee does not need to repeat the steps.

19.The owners and the management committee may be ignorant of the provisions of the Ordinance but this cannot be the basis for prolonging the life span of a management committee for the sake of ensuring continuity in the management. The contrary view is untenable. It cannot be the intention of the legislation that, notwithstanding the breach of the provisions of the Ordinance in the holding of general meetings, the management committee could continue in perpetual existence. The matter can be tested this way : if the contrary view is correct, there would be no need for the requirement of annual general meetings and retirement of the management committee, the Ordinance can simply state that the management committee shall continue in office indefinitely or until the occurrence of certain events not related to any specific period of time in which the management committee may remain in office. Insofar as a contrary view was expressed by the Lands Tribunal in the Incorporated Owners of Maple Mansion v. Ho Yiu Keung and Regent Talent Industrial Ltd. LDBM 98/2000 (unreported, date of judgement 15 February 2001), on the validity of a management committee, in my view such decision was wrongly decided. See also In Re Consolidated Nickel Mines Ltd. [1914] 1 Ch. 883.

The Counterclaim

20.The real issue in this appeal is whether the Presiding Officer was correct to dismiss the counterclaim of Bright Hill. S. 45(1) of the Ordinance provides that the Lands Tribunal shall have jurisdiction to hear and determine any proceedings specified in the Tenth Schedule. Bright Hill states that no annual general meeting has ever been held since the incorporation on 8 October 1996. It disputes the contribution demanded by the Incorporated Owners was made in accordance with the terms of the DMC. It disputes the calculation and also states that the procurement of service by the Incorporated Owners was not in compliance with the requirement of s. 20A of the Ordinance.

21.These disputes must fall within the jurisdiction of the Lands Tribunal, as specified by paragraphs (1) and (2) of the Tenth Schedule, namely, proceedings relating to the interpretation and enforcement of the terms and provisions of the Ordinance and the DMC. It also comes under paragraph (4), namely,

(a) proceedings relating to the calculation or apportionment ─ any sum payable or purported to be payable under DMC;

(b) the funds and contributions referred to in ss. 20 and 21;

(c) any management expenses or charges under s. 20 the funds would include those for the purpose of paying any outgoings in relation to any maintenance or repair work of the building as a whole.

22.S. 20 deals with, among other things, the establishment and maintenance by the corporation of a general fund to defray the costs of the exercise of its power under the deed of mutual covenant. S. 21 deals with the determination by the management committee of the amount to be contributed by the owners to the funds established under s. 20.

23.The contributions decided and demanded by the Incorporated Owners were referable to ss. 20 and 21. At that time the Management Committee could validly function as the first general meeting of the Incorporated Owners would only be required to be held not later than 8 January 1998, i.e. 15 months after the incorporation on 8 October 1996. If it turned out that the Management Committee had not properly increased the fees and decided on the contribution, then clearly Bright Hill can seek to recover the overpayment from the Incorporated Owners.

The charges

24.The charges were registered by the Incorporated Owners under clause 15 of the DMC and s. 19 of the Ordinance. Clause 15 of the DMC provides that :

"If any of the owners shall fail to pay his share under any of the provisions herein contained any of the other owners may advance the share of such defaulting owner and until repayment by such defaulting owner the amount so advanced shall be a debt due to the owner who has so advanced the sums and shall stand charged upon the share or shares and interest of the defaulting owner of and in the said premises and the said building provided that such charges shall not be binding on any person dealing bona fide for money's worth with the defaulting owner unless notice thereof shall have been previously registered in the Land Office."

S. 19 of the Ordinance provides that :

"If a deed of mutual covenant provides that if an owner fails to pay any sum which is payable under the deed of mutual covenant, a person may sell that owner's interest in the land or register a charge against such interest in the Land Registry, then, notwithstanding the provisions of the deed of mutual covenant, the corporation may, to the exclusion of such person, exercise such power of sale or register such charge in the same manner and subject to the same conditions as if it were the person referred to in the deed of mutual covenant."

25.Bright Hill's application for a declaration that the charges were wrongly registered against its Property must come within paragraphs (1) and (2) of the Tenth Schedule, namely, proceedings relating to the interpretation and enforcement of the provisions of the Ordinance and the DMC.

26.Bright Hill also asked for an order that the charges be vacated from the Land Registry. In my view this falls within the ambit of paragraphs (1) and (2) of the Tenth Schedule as well. If the Lands Tribunal has the power to declare a charge to be wrongly registered, then clearly it has the power to order the charge to be vacated from the Land Registry. Mr. Lui, counsel for the Incorporated Owners, argued that the power of the Lands Tribunal is restricted by s. 45(3) of the Ordinance which provides that :

" Subject to the provisions of this Ordinance, nothing in this section or the Tenth Schedule shall be construed to vest in the tribunal any jurisdiction other than civil jurisdiction or any jurisdiction to make any order which would, if made, have the effect of rendering void, negativing or substantially varying in whole or in part any contractual or proprietory right enjoyed by any owner or occupier or otherwise referred to in the terms and provisions of an instrument which is registered in the Land Registry including a deed of mutual covenant (if any)."

Mr. Lui submitted that the Lands Tribunal has no jurisdiction to make an order that will have the effect of rendering the two charges void.

27.I am prepared to assume, without deciding conclusively, that the wording in s. 45(3) is capable of including a charge. Nonetheless, in my view, in the context of the Ordinance, the charge is not covered by the restriction. The instruments covered by the s. 45(3) restriction clearly include those instruments such as the crown lease, assignment and deed of mutual covenant. These are the type of instruments in which the Lands Tribunal is prohibited from making any order which would have the effect of rendering void, negativing or substantially varying the contractual or proprietory rights enjoyed by the owners or occupiers under the terms of these instruments. It is, however, not necessary to limit the class of instruments so covered. What is clear is that the creation of a charge is only authorised by the terms of the DMC. S. 6 of the Ordinance provides that if there are provisions in the DMC relating to the registration of a charge, then such power may only be exercised by the Incorporated Owners. A charge will only arise under clause 15 of the DMC where the shares due from the defaulting owner are advanced by the other owners. Unlike a DMC, the charge does not exist independently. If a charge turns out to be invalid because the shares that were supposedly due from the defaulting owner were not due in the first place, then clearly the Lands Tribunal has the jurisdiction to vacate the charge without offending s. 45(3). A charge comes into being as a result of the enforcement of the DMC, an application to vacate the charge clearly comes within the ambit of paragraph (2) of the Tenth Schedule. In Mass Transit Railway Corporation v. Lam Kai Fai HCA 1796/1994, Yam J. held that s. 45(3) ：

"is nothing more than making it clear that the 10th Schedule is only concerned with the interpretation and enforcement of a registered instrument. It has nothing to do with the issue of variation (proceedings for rectification of a registered instrument) and validity of a registered instrument which remained within the jurisdiction of the High Court."

While I respectfully agree with what the learned judge said, his comment on the validity of a registered instrument has to be read in the context of the nature of a charge. S. 8(9) of the Lands Tribunal Ordinance provides that the Lands Tribunal shall have the same jurisdiction to grant remedies and reliefs, equitable or legal, as the Court of First Instance. The Court of First Instance clearly has jurisdiction to vacate a charge wrongly registered against an owner's property. Likewise the Lands Tribunal must have the same jurisdiction.

Was the Incorporated Owners properly served with the counterclaim?

28.It is not necessary to go into the question of whether the Incorporated Owner was properly served with the counterclaim. If there was any doubt on the validity of the service of Bright Hill's counterclaim on the Incorporated Owners' solicitors, a simple solution would be for the Presiding Officer to adjourn the hearing, order service of Bright Hill's counterclaim on the Incorporated Owners and then relist the hearing. Mr. Lui informed the court that the Incorporated Owners had since held a general meeting on 10 July 2000 and the position regarding the Management Committee had been regularised.

Conclusion

29.The Presiding Officer was wrong to dismiss the counterclaim of Bright Hill. The merits of the dispute between the parties on the counterclaim should be ventilated in full in the Lands Tribunal. Accordingly, I shall allow the appeal and order the Lands Tribunal to hear the counterclaim. The hearing will be conducted by another Presiding Officer. Bright Hill is entitled to the costs of the appeal. As to the costs below, Bright Hill should have the costs of and occasioned by the application of the Incorporated Owners up to and including the hearing of 8 June 2000. Bright Hill should also have the costs occasioned by its review application.

Hon. Woo JA:

30.I have had the advantage of reading Cheung JA's judgment in draft. I agree with his conclusion that the appeal must be allowed with costs. I also agree with his reasoning that the Lands Tribunal has jurisdiction in entertaining the whole of the counterclaim, including the claim for overpayment as well as for discharging or vacating the two charges registered against the Property of Bright Hill.

31.I am, however, unable to share Cheung JA's view that Deputy Judge Lee, the Presiding Officer, was correct in her decision to dismiss the claim of the Incorporated Owners on the basis that the Management Committee had failed to convene a first annual general meeting in accordance with para 1(1)(a) of the Third Schedule to the Building Management Ordinance, Cap 344. I need to express my own view on this point, not that there is an appeal from the Incorporated Owners against the decision dismissing the claim, nor that the point is necessary for the determination of Bright Hill's appeal, but that this is an important matter that relates to the interpretation of the Ordinance and the effect of not following the provisions of the Ordinance in the matter of convening meetings for an owners corporation, which may have vast and widespread implications and repercussions in connection with management of multi-owner buildings pursuant to the Ordinance.

32.The Presiding Officer described the effect of failure to convene the requisite meeting in the following ways:

"The Applicant does not have a Management Committee capable of carrying out the functions of the Incorporated Owners. It is not in a position to institute legal proceedings, to accept service and to conduct a defence." (Judgment of 8 June 2000)

"... there is no longer a validly constituted Management Committee, through which the Applicant Incorporated Owners can institute legal proceedings, accept service of documents or to conduct a defence. The Applicant has no locus standi." (Judgment of 6 July 2000 on review)

33.Under para 1(1)(a) of the Third Schedule to the Ordinance, already cited by Cheung JA, the first annual general meeting shall be convened by the Management Committee within 15 months from the date of registration of the corporation, and since the registration of the Incorporated Owners in this case was on 8 October 1996, the first annual general meeting should, according to this provision, have been convened by 7 January 1998. This has also been stated by Cheung JA. However, what is the effect of the Management Committee failing to convene such a meeting by 7 January 1998? And indeed according to what we were informed by counsel for the Incorporated Owners, the first general meeting that followed the registration of the Incorporated Owners was only convened on 10 July 2000 after the Presiding Officer had dismissed the claim, which was even after the date required by para 1(1)(b) of the Third Schedule for convening the second annual general meeting.

34.There is no express provision in the Ordinance that in the event of such a failure, the management committee will automatically dissolve or cease to have the power to represent the corporation. Also absent is any express provision that the members of the management committee will cease to hold office after the deadline. The provisions of the Ordinance which, I think, are most relevant are set out below.

The long title: To facilitate the incorporation of owners of flats in buildings or groups of buildings, to provide for the management of buildings or groups of buildings and for matters incidental thereto or connected therewith.

s. 6: The Second Schedule shall have effect with respect to the composition and procedure of a management committee.

s. 8(2)(a): With effect from the date of issue of the certificate of registration under subsection (1) -

(a) the owners for the time being shall be a body corporate with perpetual succession and shall in the name of the corporation specified in the certificate of registration be capable of suing and being sued and, subject to this Ordinance, of doing and suffering all such other acts and things as bodies corporate may lawfully do and suffer;

s. 8(5): The Third Schedule shall have effect with respect to the meetings and procedure of a corporation.

s. 18 provides for the duties and powers of a corporation.

s. 16: When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, ...

s. 29: Subject to this Ordinance, the powers and duties conferred or imposed by this Ordinance on a corporation shall be exercised and performed on behalf of the corporation by the management committee.

Second Schedule, para 3: ... the members of the management committee appointed at a meeting convened ... shall hold office until a new management committee is appointed and assumes office at the second general meeting of the corporation.

Second Schedule, para 5(1): At the second annual general meeting of a corporation convened in accordance with paragraph 1(1)(b) of the Third Schedule and thereafter at every alternative general meeting, all members of the management committee, ..., shall retire from office.

Third Schedule, para 1(1): The management committee shall convene-

(a) the first annual general meeting of a corporation not later than 15 months after the date of the registration of the corporation;

(b) an annual general meeting not earlier than 12 months, and not later than 15 months, after the date of the first or previous general meeting;

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

Third Schedule, para 1(2): 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.

(emphasis added)

35.It is important to note that the Ordinance expressly gives power to the owners to request the chairman of the management committee to convene a general meeting (para 1(2) of the Third Schedule). It would be impossible to give effect to that provision in the event that the owners request the chairman to convene a meeting after the management committee has failed to comply with para 1(1)(a) or (b) of the Third Schedule by the respective deadlines provided therein if the failure had the effect of having already made the office of all the members of the management committee, which necessarily include the chairman (para 2(1)(b) of the Second Schedule), to lapse. Para 3 of the Second Schedule expressly allows members of the management committee to hold office until a new management committee is appointed. An interpretation of paras 3 and 5(1) of the Second Schedule, combined with para 1(1) of the Third Schedule, that the management committee has ceased to exist or function 15 months after the date of the registration of the corporation or after the date of the previous annual general meeting would also give rise to a vacuum in the management of the building, as there would be no one or no body to exercise the powers and perform the duties set out in s 18 on behalf of the corporation under s 29 in the various aspects of management, such as collecting monthly management and maintenance charges, contracting with or instructing any contractors or workers to carry out necessary repair and maintenance works to the common parts after the deadline. I am therefore compelled to come to the view that that cannot be the proper interpretation of these provisions of the Ordinance.

36.The interpretation that the Management Committee would dissolve or cease to exist or be rendered powerless appears to violate the clearly expressed intent of the Ordinance as described in its long title and the provisions of para 3 of the Second Schedule. It may well be that members of the management committee, in which the power to convene meetings is vested, may face difficulty in the case of a failure to hold any annual general meeting to lay claims of a personal nature arising out of their office, against the corporation or other owners, because they have failed to discharge their duty as such officers in complying with the statutory requirement to convene the first annual general meeting or subsequent annual general meetings by the respective deadlines. This would be a matter pertinent to their duties towards the corporation and other owners in a similar position as directors towards a company and fellow directors and shareholders, but would not affect the rights and duties of the corporation towards any outsiders (see Alexander Ward & Co Ltd v Samyang Navigation Co Ltd [1975] 1 WLR 673, at 683B-C).

37.The decision in In re Consolidated Nickel Mines Ltd [1914] 1 Ch 883, cited by Cheung JA, relates to the validity of the proof of debts by directors in respect of their remuneration as directors that they had lodged with the liquidator of a company which was being wound up. No general meeting was held or called in the year 1906 or 1907 as required by articles 62 and 101 of the articles of association, but the directors continued to act as such. Articles 62 and 101 (at p 883-884) of the articles provided as follows:

"62. General meetings shall be held once in every year, ..."

"101. At the ordinary meeting in 1906 all the directors, and at the ordinary meeting in every subsequent year one-third of all the directors for the time being respectively, or if their number is not a multiple of three, then the number nearest to one-third, but not exceeding one-third, shall retire from office. A retiring director shall retain office until the dissolution of the meeting at which his successor is elected."

Sargant J held at pp 888-889 as follows:

"As to the two other directors, ..., there is another objection. By clause 62 of the articles of association and by statute (s 49 of the Companies Act, 1862) the directors were bound to summon a general meeting of the company once is every calendar year, and article 101 provided that 'At the ordinary meeting in 1906 all the directors ... shall retire from office." No ordinary meeting was held or called in 1906 or 1907, and the liquidator's contention is that all the directors vacated office on December 31, 1906, which was the last day on which a meeting of the company for that year could have been held. That contention appears to me to be well founded.

A director on his appointment does not ordinarily step into an office which is perpetual unless terminated by some act, but into an office the holding of which is limited by the terms of the articles. The meaning of article 101 is that the holding of the office of director was only to last until the end of 1906, or until the earlier date on which the ordinary meeting for that year was held. In re Great Northern Salt and Chemical Works [44 Ch D 472] is merely a decision as to the construction to be placed on clause 62 of Table A to the Act of 1962. Moreover, article 106 in the present case shews that prima facie a retiring director vacated office, and is against the applicant's contention. The duty of the directors was to call a meeting in 1906 and 1907, and they cannot take advantage of their own default in that respect and say that they still remain directors. ...." (emphasis added)

38.I am of the view that the decision of Sargant J related to the construction of the articles of association of a company as between the company and its directors, and that was done in the light of the particular matrix of facts in that case. That construction was at odds with the construction by Stirling J of article "62 of Table A to the Act of 1962" in In re Great Northern Salt and Chemical Works referred to by Sargant J. Stirling J interpreted that article 62 as enabling the directors in that case to continue in office. Moreover, Sargant J's construction was well justified by his ruling that directors should not be allowed to take advantage of their own default vis-à-vis the company. I do not think that Consolidated Nickel Mines should be applied to the interpretation of the Ordinance in our case.

39.There may be apprehension that a management committee may persist in not convening any annual general meeting after registration of the corporation by the deadline or even for as long as they wish in order to perpetuate the committee members' position and power in controlling the management of the building. But this fear does not justify the interpretation, in the absence of express language, that the authority and power of the management committee and its members would lapse after the deadline. First, power is given by para 1(2) of the Third Schedule to a sufficient portion of owners to require the chairman to convene a meeting. If that is refused, resort can always be made to the Lands Tribunal, which has power under para 1 of the Tenth Schedule to the Ordinance, to enforce this provision. The perpetuation of the management committee could thus only be achieved with the consent, acquiescence and lack of reaction from the owners. Secondly, the intent of the Ordinance is clearly to enable and facilitate owners to have control over the management of their building, and it would be as reasonable to assume that some owners who have become committee members may wish to perpetuate their control of the management as that few owners would like to take up this kind of office and the responsibility of management.

40.In the result, albeit without hesitation, I would prefer the interpretation of the provisions of the Ordinance in this respect that when a management committee fails to convene the first annual general meeting, and for that matter, any subsequent annual general meeting, the management committee will continue to operate and its members will continue to hold office until the next annual general meeting is held. When the second general meeting is held, then the members of the management committee shall retire from office in accordance with para 5(1) of the Second Schedule. I am of the view that the decision of HH Judge Chow on the same point in Incorporated Owners of Maple Mansion v Ho Yiu Keung & Regent Talent Industrial Ltd, LDBM 98/2000 (15 February 2001, unreported), p 3, is correct.

41.As said before, this difference of opinion between Cheung JA and I does not alter the outcome of this appeal or affect the treatment by the Lands Tribunal of the counterclaim of Bright Hill.

Hon. Leong CJHC:

42.I have had the opportunity of reading the judgments of Woo JA and Cheung JA. I agree with the conclusion and the reasons therefor that the counterclaim of the respondent should not have been dismissed by the Presiding Officer of the Lands Tribunal. The application to vacate the charges from the Land Registry was on the basis that the charge was wrongly registered because there was no basis for the charge to be made. That being the case, it is something not precluded from the Lands Tribunal by section 45(3) of the Building Management Ordinance nor outside the Lands Tribunal's jurisdiction under section 8(9) of the Lands Tribunal Ordinance. It is not correct to say that where there is no Management Committee in being, the Incorporated Owners could not have been served with the counterclaim so that the counterclaim could not have been made by an individual owner. However, I am of the opinion that, in so far as whether the Management Committee will still remain in being after a period of more than 15 months from the last annual general meeting where no further general meeting has been held, an issue which is not related to the matter of the respondent's appeal, I do not think that the Management Committee will dissolve by itself because of the lapse of time without a general meeting to re-elect the Management Committee.

43.Section 29 of the Building Management Ordinance provides that:

"The powers and duties conferred or imposed by the Ordinance on a corporation shall be exercised and performed on behalf of the corporation by the management committee."

44.Section 16 of the Ordinance provides that the rights, powers, privileges and duties of the individual owners in respect of the common parts of the building shall be performed by the incorporation. It would appear that during the subsistence of the corporation it is necessary to have a Management Committee in being and the law does not intend that there should be no Management Committee in existence at any time. That being the case, where no further general meeting has been held for a period of 15 months or more since the previous general meeting, the Management Committee should not cease to exist for failure of there being a general meeting. If any individual owner considers that the Management Committee is undesirable to continue in office, the owners can always convene a general meeting to effect the removal or the dissolution of the current Management Committee and to have a new one re-elected.

45.If no such general meeting is held and it is desirable that the current Management Committee should be dissolved, then the authority can always, under the provisions of the Building Management Ordinance, take control of the matter. Thus, in the present case, the fact that no second annual general meeting has been held after an expiry of 15 months would not invalidate the existing Management Committee.

46.In any case, as I have said before, I agree that this appeal should be allowed and the counterclaim should be remitted back to the Lands Tribunal for continuation of the trial but before another Presiding Officer of the Lands Tribunal.

47.This court allows the appeal. We also order that the counterclaim be remitted back to the Lands Tribunal for continuation of the trial but before another Presiding Officer.

Representation:

Mr. Simon K. M. Lui instructed by M/s William Lam & Co. for the Applicant

Respondent : Bright Hill Management Consultants Company Limited, in person, represented by its director Mr. Lie Han Ji