The Incorporated Owners of Beverley Heights v. Kwok Yui Sun

LDBM000032/1995

Building Management Case No. 32 of 1995

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HEADNOTE

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Building Management Ordinance - Statutory interpretation - Management Committee - Notice of meetings - Validity of resolution - Remuneration for work done for building management - Allowance for office holder

The respondent was one of the members of the management committee. At a meeting of the committee, it was resolved as "Any other business" that a firm wholly owned by the respondent be engaged to provide secretarial service at $5,000 per month. For four months, the firm was paid. The applicant owners incorporated contended that the payments were unjustified and sought to recover all.

Held: (1) applying paragraph 8(2) of the Second Schedule to the Building Management Ordinance, since the notice calling for the meeting did not specify the resolution to be passed at the meeting and the resolution was passed as "Any Other Business", the notice was defective; those who attended the meeting, being far short of the full committee, could not have rectified the irregularity; section 37 of the Ordinance provides saving for failure to serve some individuals entitled to attend a meeting but clearly the present case is not the sort covered by this section; (2) on the true construction of the provision, contracting out of duties of individual office holders of the management cannot qualify for remuneration under section 18(2)(c) of the Building Management Ordinance ; (3) "allowance" in section 18(2)(aa) different from "remunerate" in section 18(2)(c) of the Building Management Ordinance; members of a management committee should not expect remuneration fully commensurate with the market value of their work as such; as such they are entitled to only a statutory allowance.

Building Management Case No. 32 of 1995

IN THE LANDS TRIBUNAL OF HONG KONG

Coram: Deputy Judge Li

Date of Judgment : 18 July 1995

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DECISION

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1. In this matter, the applicant seeks to recover $20,000 paid by the applicant to the respondent for secretarial services provided by the respondent for four months in 1994 at the rate of $5,000 per month when the respondent was a member of the management committee of the applicant.

2. It is common ground that the respondent was one of the fourteen duly appointed members of the management committee for 1994 of the Incorporated Owners of Beverley Heights. It is also common ground $20,000 was paid from the funds of the applicant to a firm called Arch Link for certain services provided by Arch Link. The respondent admits that he was at all material times the sole proprietor of the said Arch Link and that he had declared his interest in Arch Link at a meeting of the management committee held on 7th December 1993 ("the meeting"). According to the Grounds of Opposition filed by the respondent, during the meeting, management fees and secretarial charges were discussed on the item of "Any Other Business" and a resolution was then passed appointing Arch Link to provide secretarial services to the applicant including "settling management fees invoices, serving notices of meetings of Committee members, drafting letters, employee appointment contracts, house rules, all typing works (sic), minutes of meetings, and circulars from time to time" at the rate of $5,000 per month. The respondent contends that Arch Link did provide services pursuant to the resolution and was paid for four months. It is the respondent's position that the payments were authorized pursuant to section 18(2)(c) of the Building Management Ordinance, Cap. 344 ("the Ordinance").

3. The applicant contends that (1) there was no resolution at the meeting authorizing the payments, that (2) even if there was such resolution, the resolution was invalid because no proper notice was given for the resolution, that (3) even if the resolution is valid, the respondent being the alter ego of Arch Link could not be properly remunerated under section 18(2)(c) of the Ordinance, that (4) the remuneration at $5,000 per month to the respondent exceeded the maximum limit permitted by section 18(2)(aa) of the Ordinance and was therefore recoverable, and that (5) certain work done by Arch Link purportedly pursuant to the said resolution was duplicitous, being falling within the duties of the secretary of the management committee or the building manager employed by the applicant and so it was wrong to approve separate payment to Arch Link.

4. At the last hearing on 30th June 1995, the parties were minded to start calling witnesses to testify on factual issues such as whether there was a resolution passed, the circumstances in which it was passed, the services provided by Arch Link and the duties of other parties. I could see that the conflict of evidence will aggravate the relationship of the parties and possibly split the residents of the building estate into factions when one or other witnesses would eventually be held to have in effect lied in court or not acted in accordance with acceptable moral standards in the management of the affairs of the applicant. Also in consideration of the time needed to hear witnesses in this cases which could have been profitably used for other cases, I suggested to the parties that perhaps the case can be decided on strict legal principles so that any cause lost can be attributed to purely technical grounds; that way, the parties concerned, extending to those in court and outside court, as neighbours and fellow residents within the building estate can repair relations. Consequently, counsel for the parties made submissions on preliminary points of law which may, perhaps, dispose of the case without hearing further evidence.

5. As I see it, and as counsel in their submission have argued, there are three crucial preliminary points. The first is whether the resolution allegedly passed at the meeting was valid as a matter of procedure. The second is whether the respondent could properly be appointed and remunerated under section 18(2)(c) of the Ordinance.

6. In regard to the first question, Miss Liu for the applicant refers to paragraph 8(2) of the Second Schedule to the Ordinance which says:-

"Notice of a meeting of a management committee shall ..... specify the place, date and time of such meeting and the resolution (if any) that are to be proposed."

7. Obviously, the notice calling for the meeting did not specify the resolution which the respondent alleges was passed at the meeting. The matter was discussed under "Any Other Business". Clearly the notice was defective. The respondent concedes that only 7 or 8 members out of a total of 14 of the management committee attended the meeting. Those who attended the meeting, being far short of the full committee, could not have rectified the irregularity. Section 37 of the Ordinance provides savings for failure to serve some individual members entitled to attend a meeting but clearly the present case is not the sort covered by this section.

8. Furthermore, it is trite law, and taken as conceded by the respondent in his Grounds of Opposition, that a person being a member of a body to deliberate on a matter in which that person has private interest must disclose to the body his interest. In my view, this duty to disclose interest should be handled in the same manner as the duty to notify any proposed resolution, i.e. disclosure should be in the notice of meeting so that persons entitled to raise questions or object may decide whether to attend the meeting. See Young v. Ladies Imperial Club (1920) 2 K.B. 523. Obviously, in this case, there was no disclosure of interest in the notice.

9. Moreover, bearing in mind section 18(2)(aa) of the Ordinance requires approval by the corporation in general meeting for payment to members of the management committee, I should think remuneration under section 18(2)(c) of the Ordinance to a member of the management committee should also be approved by the corporation in general meeting with proper notice having been given to all members of the corporation.

10. In the premises, on the first point alone, I would hold in favour of the applicant.

11. In regard to the second question, Miss Liu refers me to the wording of section 18(2)(c) which provides that a corporation may in its discretion

"retain and remunerate a manager or other professional trade or business firm or person to carry out on behalf of the corporation any of the duties or powers of the corporation under this Ordinance or the deed of mutual covenant (if any)." (Emphasis added)

12. I think one must distinguish (1) the powers and duties of the corporation which are corporate in nature, (2) the powers and duties of the management committee which are collective in nature, and (3) the powers and duties of each member of the management committee which are personal in nature. There must be numerous instances where the performance of duties of a member of the management committee is also the discharge of the duties of the corporation or the management committee. However, there are also instances where the act of a member of the management committee cannot be treated as a corporate act or collective act. For example, the secretary is required by provisions in the Second Schedule to issue notice of meeting of the management committee. One cannot say that the issue of notice is the act of the corporation, because the corporation has no power nor duty to issue notice of meeting of the management committee.

13. By the same token, where section 38 of the Ordinance specifically requires the secretary to maintain a register of owners, the powers and duties of the secretary for that purpose are his, the management committee as a collective has nothing to do with those powers and duties.

14. Of the "settling management fees invoices, serving notices of meetings of Committee members, drafting letters, employee appointment contracts, house rules, all typing works, minutes of meetings, and circulars from time to time" done or to be done by Arch Link, I find that settling management fees invoices, serving notices of meetings of management committee, drafting letters and typing work, all purely secretarial or clerical duties, cannot possibly be regarded in law as powers and duties of the corporation. It follows that the contracting out of these duties cannot come under section 18(2)(c) of the Ordinance. It is not clear what "employee appointment contracts, house rules, minutes of meetings, and circulars from time to time" means. Assuming "employee appointment contracts, house rules, minutes of meetings and circulars from time to time" come under powers and duties of the corporation, they are mixed with, and thus degraded by, purely secretarial or clerical duties that I do not think they should be isolated for the purpose of justifying remuneration under section 18(2)(c) of the Ordinance.

15. Another approach to the second issue is the purpose and effect of section 18(2)(aa) of the Ordinance. That paragraph quite clearly sets a maximum limit for allowances receivable by management committee members. It has been canvassed on behalf of the respondent that management committee members should not be barred from receiving more if the work involved is particularly onerous. It is said that it would be unfair to expect committee members to provide service on statutory allowance in all cases irrespective of the workload.

16. I should think "allowance" in section 18(2)(aa) in contradistinction to "remunerate" in section 18(2)(c) of the Ordinance very well illustrates the nature of payment to management committee members. Members of a management committee should not expect remuneration fully commensurate with the market value of their work. Their work in the committee is a kind of public service. The Ordinance already tries to be fair by setting different levels of allowances for estates with different number of units. See the Fourth Schedule to the Ordinance. No person can be compelled to serve on a management committee. A person may very well decline to accept office in a management committee if he or she feels that the level of allowance for the office is unsatisfactory.

17. In the premises, on the second point, I also hold that the respondent did not qualify for payment under section 18(2)(c) of the Ordinance.

18. Subject to what the parties may say concerning hearing of evidence or other issues, I invite the parties to agree the terms of the proper order to be made for the amount and time by which the respondent must refund the applicant and for costs. Failing agreement, either party may apply by notice for hearing to be restored for making of order by the Tribunal.

Dated this 18th day of July, 1995.

Representation:

Miss Teresa Liu of Messrs Sit, Fung, Kwong and Shum for the applicant.

Mr. Herman Hui of Messrs Herman H.M. Hui & Co for the respondent.