Triumphal Fountain Ltd. and Another v. Chan Chi Lun and Others
Read the full judgment text of LDBM 309/2001 on BabelCite. This Lands Tribunal judgment was delivered on 19 October 2001.
1. The Applicants in the present case seek a declaration, namely, that a purported resolution passed on 17 August 2000 ("Resolution") " for appointing the 1st, 2nd, 3rd and 4th Respondents as the members of the management committee and the 4th Respondent as the chairman thereof " was not in compliance of Sections 3 and/or 5 of the Building Management Ordinance Cap. 344.
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LDBM000309/2001 Head Note Building Management - Sections 3, 5, Paragraph 4(2) of Third Schedule of Buildings Management Ordinance Cap. 344 - Whether proxy forms valid - Whether proxy forms of corporations must be under seal - Validity of resolution of meeting of owners for establishment of owners incorporation LDBM 309/2001 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BUILDING MANAGEMENT APPLICATION NO. 309 of 2001 ________________________
Coram: Deputy Judge MAK, Presidnig Officer of the Lands Tribunal Date of Hearing: 10, 11 October 2001 Date of Judgment: 19 October 2001 ________________________ JUDGEMENT ________________________ Introduction 1.The Applicants in the present case seek a declaration, namely, that a purported resolution passed on 17 August 2000 ("Resolution") "for appointing the 1st, 2nd, 3rd and 4th Respondents as the members of the management committee and the 4th Respondent as the chairman thereof " was not in compliance of Sections 3 and/or 5 of the Building Management Ordinance Cap. 344. Parties 2.The 1st Applicant is the registered owner of a number of properties of the building known as Yee Fat Mansion, Nos. 2-4 Min Fat Street, Happy Valley ("the Building") These properties are situated at respectively Shops 2, 3, 4 and 5 on the Ground Floor, the First and the Second Floor of the Building. The 2nd Applicant is the registered owner of Shop 1 on the Ground Floor of the Building. The Respondents are respectively the registered owner or in control of a corporate owner of the following properties of the Building :-
The Building 3.The Building was completed in about 1992 and is a 24 storey building with each floor consisting of one single unit. The Ground and First Floors are commercial properties and the Second to Twenty Second Floors are residential floors. There was a Deed of Mutual Covenant dated 9 April 1992. Altogether the interests of the Building and the land where it stands are divided into 350 undivided shares in the following manner :-
4.It can be seen that the 1st and 2nd Applicants together hold 127 undivided shares out of the total of 350, or 36.28%. 5.One Timmax Limited ("Timmax") was the developer of the Building. Timmax is a limited company incorporated in Hong Kong and had 10,000 shares full paid in 1992. On 25th May 1992, the 2nd Applicant resigned as director of Timmax. On 27 August 1992, the 2nd Applicant transferred 749 of his shares in Timmax to the 1st Applicant and one share to one Sureluck Nominee Limited ("Sureluck"). Sureluck and one Buoyant Profits Limited (who is a BVI company) are the shareholders of the 1st Applicant. 6.The manager of the Building was originally provided in the Deed of Mutual Covenant ("DMC") as one Tong Mou Property Dealing Company Limited ("Manager"). This is a property management company still controlled by the 2nd Applicant. Meeting in June 2000 7.In June 2000 there was a meeting of the owners to discuss the establishment of an owners incorporation under the Building Management Ordinance Cap. 344. At that time the Chairman of the meeting was the 2nd Applicant. He also represented the Manager. There was a request by Madam Mak Hei Wood ("Madam Mak") (who is representing the Respondents in these proceedings) that in view of the unsatisfactory management, security and hygiene conditions of the Building, there should be established an owners incorporation. It appeared that he had made himself clear by representing to the owners at that meeting that he would not participate in any way in the establishment of the proposed owners incorporation. The owners then contacted a Miss Eunice Hung of the Wan Chai District Office for guidance. Madam Mak who is medical doctor by profession and also the wife of the 1st Respondent relied upon a booklet provided to her by the District Office and arranged for the issue of a notice of an owners meeting on 17 August 2000. Meeting on 17 August 2000 8.It is not in dispute that the notice of the meeting of the owners on 17 August 2000 was a valid one for the purpose of establishment of an owners incorporation and election of members of the management committee. It was also published in newspaper. The content of the notice was in Chinese but includes an agenda for the election of a temporary chairman and secretary, followed by the resolutions for establishment of an owners incorporation and appointment of various members of management committee. 9.At about 7:30 pm on 17 August 2000, most of the owners or occupiers had turned up for the meeting. This meeting was also attended by two staff of the Wan Chai District Office. There were some 30 to 40 people present. The location of the meeting was a room at the Hong Kong Children and Youth Services, Sing Woo Children Youth Centre at 20, Kwai Sing Lane, Sing Woo Road in Happy Valley. Notwithstanding his earlier assertion that he would not participate in the establishment of owners incorporation, which was clearly the main object of that meeting, the 2nd Applicant turned up. He actually turned up together with 6 others holding proxy forms for the various shops or commercial units :
10.It is important at this juncture to note that all the corporate proxy instruments presented at the meeting, including those for the 1st Applicant and the 20th Floor owner, were not under seal. 11.The 2nd Applicant before the meeting was held raised queries as to the identity and authority of those present. He had with him a copy of the DMC and he complained the proxies had not been deposited with the Manager three days before the meeting. He also went so far as to insist on checking the proxy forms himself. At that time the file holding the proxy forms and other documents were busily passed around and he was unable to have access to those documents. 12.The manner in which the 2nd Applicant had behaved can be accounted by one Miss To who had given evidence for the Applicants. She was a clerk working for a Tong Mou Property Dealing Agency Company, which is a registered property agency of which the 2nd Applicant was the proprietor. This company rented a shop from the 1st Applicant. She said that she heard the 2nd Applicant had raised various queries during the meeting, including :
13.After consultation with his legal representative, the 2nd Applicant went on to declare that the meeting was not valid. His objection was rejected and the two District Office staff had to telephone their superior for clarification and consented that the meeting could go on. He and the six representatives of the 1st Applicant then left the meeting. 14.After a few minutes, the 2nd Applicant together with other representatives of the 1st Applicant returned to the meeting. Apart from the 2nd Applicant, the other representatives of the 1st Applicant produced their proxy instruments and put down their signatories. They stayed throughout or throughout most of the proceedings. They also participated in the proceedings and were allowed to cast their votes. In respect of their votes, they had unanimously voted, save for one instance as stated below, and these are recorded in a printed table of the Respondent's Bundle page 23 :-
15.In my judgment it is clear that the intention and purpose of the 1st and 2nd Applicants returning to that meeting was to create a situation that would be most favourable to the 1st and 2nd Applicants in having a place or say in the management committee. According to Miss To, she said because the 1st and 2nd Applicants had over 30% of the undivided shares, it was only right that they should have a place in the management committee. 16.The outcome did not however turn out in favour of the 1st and 2nd Applicants. In fact all their votes were defeated. The 4th Respondent was first elected as "interim" chairman for presiding the meeting and one Miss Vikki Li was elected as "interim" secretary of the meeting. Then the meeting proceeded to resolve the incorporation of the owners and election of the members of the management committee. The 1st to 4th Respondents together with one Mr. HC Liu (being a co-owner of the 18th Floor) were elected as members of the management committee. Applicant's Case 17.The Applicant now brought the present legal challenge. They did not suggest there was any element of dishonesty but instead complained that there were a number of irregularities at the meeting :-
Entitlement to bring present proceedings 18.The Applicant's legal challenge is wide ranging, but I think there are several features of this case which would dispose of this Action more quickly :-
19.The Respondents by Madam Mak complained that the 2nd Applicant was blowing hot and cold, first he said he would not participate in the establishment of an owners incorporation, and yet he came to the meeting on 17 August 2000 and tried to interrupt the proceedings. Certainly the 1st and 2nd Applicants were acting in concert in this matter. 20.In my judgment, under the special circumstances of this case, the conduct of both the 1st and 2nd Applicants, by first objecting to authenticity and authority of those present and left and then returned to take part in the election of the management committee, clearly amounted to an election to waive his rights to object :-
21.Firstly, in respect of the 2nd Applicant, it was a pre-meditated move on his part to first challenge the identity and authority of the owners or their representatives. After having failed in his attempt, he took an inconsistent move by returning to the meeting, took part in the election process and voted for himself and the 1st Applicant. There and then he made no express reservation of his rights to challenge the identity or authority of those who were present. The other owners had acted on his inconsistent move and allowed his vote be counted. 22.In respect of the representatives of the 1st Applicant, they had followed the move of the 2nd Applicant. Miss To was an employee of a business of the 2nd Applicant and represented the same time a shop of the 1st Applicant. She was keen to confirm that she had not voted for one Mr. Cheung. The Respondents said she had in fact done so, perhaps under a mistake. The other owners had acted on their inconsistent move and allowed their votes be counted. 23.All in all, by the time they returned to the meeting, the Applicants had elected to produce their proxy instruments and cast their votes without any express reservation of their rights. It is clear that they had come to the meeting as a result of a valid notice and they were as late as the others in bringing the proxy instruments and without any seal of the 1st Applicant. By the time they put down their signatories they should have satisfied themselves with the identity or authority of those present. The Respondents must have acted on their withdrawal of objections, and must have also acted to their detriment in allowing the Applicants to cast their votes and taking account of their votes. 24.In my judgment, absent any element of fraud on the part of the Respondents, the Applicants are in law estopped by their own conduct to object to the identity and authority of the owners or their representatives present at the meeting on 17 August 2000. 25.As shall be seen below, I am satisfied on the evidence before me there was nothing that could be suggested that there had been dishonesty as to the authority or identity of those present. That being the case, it is now too late and practically unjust to the Respondents (and other owners) then present to allow the sort of relief now sought by the Applicants. 26.On this ground alone, I hold that the Applicants do not have a case to begin with. However, if I am wrong I would still hold that Sections 3 and 5 of the Building Management Ordinance Cap. 344 had been duly complied with. This requires an investigation into the various objections of the Applicants. Sections 3 and 5 of the Building Management Ordinance Cap. 344 27.Before examining the objections of the Applicants, it is important to refer to the relevant provisions of the Building Management Ordinance Cap. 344 and their relationship with the DMC. 28.In 1992 when the DMC was executed, the predecessor of the Building Management Ordinance, namely, the Multi-storey Buildings (Owners Incorporation) Ordinance ("Old Ordinance") was already enacted. The preamble of the Old Ordinance clearly states that it was enacted to "facilitate the incorporation of owners of flats in multi-storey buildings, to provide for the management of such buildings and for matters incidental thereto or connected therewith". 29.Section 3(1) of the Old Ordinance governs the appointment of a management committee. Under Section 3(1) of the Old Ordinance, a meeting of the owners to appoint a management committee may be convened by any person authorized to convene such a meeting by the deed of mutual covenant or by owners of not less than five per cent of the shares. Section 3(2) of the Old Ordinance then provides a management committee may be appointed at a meeting convened under Section 3(1), in accordance with the deed of mutual covenant, or if the deed of mutual covenant contains no provision for the appointment of a management committee, by a resolution of the owners of not less than 50% of the shares. This 50% shares requirement was relaxed and reduced to 30% in July 2000 by the Building Management (Amendment) Ordinance (Ord. 69 of 2000), and this is now Section 3 of the Building Management Ordinance Cap. 344 :-
30.In respect of proxy, Section 5(5)(b) of the Old Ordinance provides that at a meeting convened under Section 3, a vote may be cast either personally or by a proxy appointed in accordance with Paragraph 4(2) of its Third Schedule. Section 5(6) of the Old Ordinance then requires the proxy instrument shall have no effect unless it is produced at the meeting. Paragraph 4(2) of Third Schedule of the Old Ordinance then provides the instrument appointing a proxy shall be in writing signed by the owner, or if the owner is a body corporate, under the seal of that body. Paragraph 4(3) of the Third Schedule of the Old Ordinance also requires the appointment of a proxy shall have no effect unless the instrument appointing the proxy is lodged with the secretary of the management committee not less than 48 hours before the time for the holding of the meeting or within such lesser time as the chairman shall allow. 31.The requirement of lodging of proxy not less than 48 hours before the meeting was relaxed and reduced to 24 hours in May 1993 by the Multi-storey Buildings (Owners Incorporation) (Amendment) Ordinance (Ord. No. 27 of 1992). This 24 hours requirement remains unchanged and is now Section 5(6) of the Building Management Ordinance :-
32.Paragraph 4(2) of the Third Schedule of the Building Management Ordinance Cap. 344 also provides that
33.In my judgment, the construction of the above provisions of the Building Management Ordinance Cap. 344 as far as this case is concerned is that :-
34.In relation to acceptance of proxy instruments, the question is more difficult. Section 5(5) of the Building Management Ordinance Cap. 344 provides that "At a meeting convened under section 3 ... (b) a vote may be cast either personally or by a proxy appointed in accordance with paragraph 4(2) of the Third Schedule". Then Paragraph 4(2) of the Third Schedule of the Building Management Ordinance Cap. 344 provides that "The instrument appointing a proxy shall be in writing signed by the owner, or if the owner is a body corporate, under the seal of that body". 35.Paragraph 4(2) of the Third Schedule of the Building Management Ordinance Cap. 344 is not drafted clearly first as to the meaning of the word "seal" so it should be construed to mean the common seal normally applied by companies, for example, those incorporated under the Companies Ordinance Cap. 32. 36.Secondly, it is not clearly stated whether the proxy instrument should be signed. 37.Thirdly, it is not clearly stated whether the seal should be applied in a situation where the proxy instrument was in all aspects valid and authentic and in the absence of the application of the seal. 38.In my judgment, the construction of Paragraph 4(2) of the Third Schedule of the Building Management Ordinance Cap. 344 must be given the meaning that would not defeat its purpose, namely, to allow the use of proxy whether it is the case of a person or a corporation. The purpose of using any common seal is to serve as evidence of authenticity. In the present case where there is no common seal applied to the proxy instrument it merely raises a presumption that the proxy instrument is not authentic. If indeed the proxy instrument is duly signed and authentic in all respects save the application of seal, then Paragraph 4(2) of the Third Schedule does not apply. 39.This construction is in accordance with the trend that the insistence on the use of a seal is appropriate only to contractual liability, and even then it is quite unworkable in modern conditions as recognized in Corporate Bodies Contracts Ordinance Cap. 293 where contracts by body corporate (other than companies incorporated under the Companies Ordinance Cap. 32) need not be under seal. In the context of limited companies established under the Companies Ordinance, the requirement of common seal for authentication has been abrogated by Section 36 of the Companies Ordinance Cap. 32 :
DMC and the Building Management Ordinance Cap. 344 40.Turning now to the DMC, under Clause 8(a) of the DMC the Manager was under a duty to manage the Building until its appointment is terminated by a committee called the "Owners' Committee" upon a majority resolution giving the Manager 3 months' notice to terminate its service. Under Clause 18(a) of the DMC, it is envisaged that the Owners' Committee would be formed within 9 months of the date of the DMC (that is, 9 April 1992) :-
41.Clearly the Manager was under a duty to establish an Owner's Committee in the present case. It had apparently failed to establish one. 42.Clause 18(c) of the DMC then provides that
43.Clause 18 then prescribes the procedure for conduct of the Owners' Committee proceedings :
44.Clause 19(h) of the DMC then provides for the function of the Owners' Committee :
45.Then Clause 20 of the DMC provides for the procedure laid down to form an incorporated owners :
46.From the above provisions, it can be seen that the DMC envisaged the following :-
47.The term "owners committee" also finds its place in Sections 34D of the Building Management Ordinance Cap. 344 which imposes the following mandatory terms so as to allow majority decision of owners in a properly convened meeting to prevail :-
Applicants' Complaint : No checking of identity 48.The Applicants do not challenge the validity of the notice of the meeting nor the owners had not received such notice. I have heard evidence from both Miss To for the Applicants and Madam Mak for the Respondents. Miss To in her witness statement had suggested that Madam Mak replied to the 2nd Applicant that the convenors had no means to check the identity of those present. I am satisfied with the explanation of Madam Mak that this recollection of Miss To was not true. In fact in so far as there is any inconsistency in evidence between Madam Mak and Miss To I would prefer Madam Mak's version. Miss To's recollection is hampered by the fact that she never lived at the Building and was not familiar with the owners. She is also an employee of a company of the 2nd Applicant. This is a small building with a small number of owners and Madam Mak had lived here for many years. Prior to the meeting she and others had made efforts to contact the owners. At the meeting she had used the relevant forms to confirm identity of those present. I am satisfied that Madam Mak had clearly made all reasonable efforts to check and she had no difficulty in recounting her efforts. Proxy Forms 49.The Applicants complain the authority of the following proxies were in doubt :-
50.In respect of 5th Floor, Madam Mak explained that Miss Li Nga Yee was present, not Miss Camay Wong. On that day a Madam Doreen Ho was supposed to represent the owner Miss Camay Wong but she was ill. Therefore Miss Li Nga Yee was appointed by Madam Doreen Ho in her stead. Madam Doreen Ho has made out a handwritten authorization letter and I am satisfied this is authentic. As regards late submission of the proxy form, the person presiding was the 4th Respondent and he had apparently approved the late delivery of all proxy forms including those of the Applicants. 51.In respect of 6th Floor, the complaint was that the proxy form was delivered late. I am satisfied that the person presiding was the 4th Respondent and he had apparently approved the late delivery of the proxy instrument. 52.In respect of 7th Floor, Madam Mak explained in fact both the registered owner Mr. Yip Wai Kwong and the signatory Madam Wong were present. I am satisfied Madam Mak was telling the truth. The table recording the votes only shows that Mr. Yip had elected not to vote. He was a customer of the property agency where Miss To was working and he was putting his property for rental in the market at the time. 53.In respect of 9th Floor, the complaint was that the relevant proxy form was delivered late. I am satisfied that the person presiding was the 4th Respondent and he had apparently approved the late delivery of the proxy instrument. 54.In respect of 10th Floor, the complaint was that the registered owner was not present. Having heard the evidence I am satisfied with Madam Mak's explanation that in fact the registered owner Mr. Au was present. 55.In respect of 19th Floor, Madam Mak explained that the registered owner at that time had already passed away. Madam Ng Yau was his wife. She was an old woman and occupying the unit herself. She was in the course applying for letters of administration. I am satisfied that Madam Ng Yau if she had the letters of administration she would have been entitled to represent her late husband as owner. However, there is no evidence from the Applicant that she had no letters of administration at the date of the meeting. Since the Applicants bear the burden to prove the lack of authority on her part, on this basis I would rule that her vote is valid. 56.In respect of 20th Floor, it is true that Mr. Mak (the 4th Respondent) had a proxy from the registered owner which was not under seal. I have ruled that absent any dishonesty, a duly signed proxy form and regular in all respects except the seal is valid. In the circumstances there is nothing that can suggest the relevant proxy instrument was not valid. 57.I am therefore satisfied that the Applicants' objections to the proxy forms are not valid. I should add that it would be lamentable if a technical breach such as those that are now suggested by the Applicants were held to entitle a dissentient member or minority to obtain relief to restrain the carrying out of a resolution of the meeting of owners. 30% of the shares voting 58.Section 3(2)(b) of the Building Management Ordinance Cap. 344 provides that if the DMC contains no provision for the appointment of a management committee, the management committee may be appointed by a resolution of the owners of not less than 30% of the shares. 59.On the basis of my ruling the votes including those cast by the Applicants were valid. There is nothing to suggest the resolution was not supported by owners of less than 30% of the shares. 60.For the avoidance of doubt, I would also dismiss the complaint that the Respondents in their purported capacities as elected member of management committee should not have applied for registration of an owners incorporation under Section 7 of the Building Management Ordinance Cap. 344. Other matters 61.The Applicants had not made all those elected as members of the management committee at the meeting on 17 August 2000, including one Mr. HC Liu who is the registered owner of the 18th Floor. He should have been joined and absent any good explanation I do not think this is a properly constituted action. Conclusion 62.I therefore would give judgment in favour of the Respondents and dismissed the application of the Applicants. I would make an order nisi that there be no order as to costs and give leave to both parties to apply to vary the costs order within 14 days if they intend to apply.
Representation: The Applicants: represented by Mr. Fung Kwok Ki of Messrs. Yuen & Partners. The 1st to 4th Respondents: represented by Madam Mak Hei Wood, Fiona. |
Cases cited in this judgment
Further hearings and rulings under LDBM 309/2001