Imax Investments Ltd and Others v. The Icorporated Owners of Yue Shing Commercial Building
Read the full judgment text of LDBM 316/2004 on BabelCite. This Lands Tribunal judgment.
1. The Respondent is the Incorporated Owners of Yue Shing Commercial Building, 15-19 Queen Victoria Street, Central, Hong Kong (“the Building”). The 1 st Applicant is the present registered owner of Units A, B & C of 20 th Floor of the Building (“the Units”). The 2 nd and 3 rd Applicants were previously the joint registered owners of the Units and they transferred the Units to the 1 st Applicant on 25 July 2003.
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LDBM 316 OF 2004 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION Building Management Application No. 316 of 2004 _______________ Between
_______________ Coram: Deputy Judge WONG, Presiding Officer of the Lands Tribunal Date of Hearing: 4 April, 2005 Date of Handing Down of Judgment: 29 April, 2005 _______________ J U D G M E N T _______________ Background 1.The Respondent is the Incorporated Owners of Yue Shing Commercial Building, 15-19 Queen Victoria Street, Central, Hong Kong (“the Building”). The 1st Applicant is the present registered owner of Units A, B & C of 20th Floor of the Building (“the Units”). The 2nd and 3rd Applicants were previously the joint registered owners of the Units and they transferred the Units to the 1st Applicant on 25 July 2003. 2.On 17 May 2004, the Respondent filed a claim in the Small Claims Tribunal under Case No. SCTC036102/04, whereby the Respondent claimed against the 1st Applicant for the following items: -
3.The 1st Applicant admitted Item 1 and Item 2 of the claim, but raised a counterclaim for the refund of $126,000.00 being the contribution paid by the previous owners of the Units, i.e. the 2nd and 3rd Applicants, to the Respondent on 9 October 2002 in respect of the Building’s fire safety improvement works. As the counterclaim was beyond the jurisdiction of the Small Claims Tribunal, the Adjudicator in the Small Claims Tribunal transferred the counterclaim to the Lands Tribunal on 21 September 2004. The Adjudicator entered judgment in favour of the Respondent for Item 1 and Item 2 of the claim, but stayed the enforcement of the claim pending the final disposition of the counterclaim. The Adjudicator also dismissed Item 3 of the claim. Thus, the present proceedings in the Lands Tribunal concern only the counterclaim. 4.By an order of H.H. Judge Chan on 28 October 2004, the titles of the parties were reversed, i.e. the Respondent (who was the claimant in the Small Claims Tribunal action) became the respondent in the present proceedings, and the 1st Applicant (who was the defendant in the Small Claims Tribunal action) became the applicant in the present proceedings. On 4 January 2005, H.H. Judge Chan gave leave to join the 2nd and 3rd Applicants as applicants in the present proceedings. In other words, the counterclaim in the Small Claims Tribunal has become the claim of the 1st, 2nd and 3rd Applicants against the Respondent in the present proceedings. Facts of the case 5.On 25 July 2000, the Fire Services Department and the Buildings Department issued 2 Fire Safety Improvement Directions (collectively “the Fire Safety Directions”) to the Respondent requiring the Respondent to carry out various fire safety improvement works for the Building. 6.At an owners’ meeting held on 28 August 2001, the Respondent resolved that a Task-force Committee (“the Fire Safety Committee”) be formed to co-ordinate and handle the fire safety improvement works, and to engage a consultant company to take steps to ensure compliance of the Fire Safety Directions. The Respondent further resolved that the fire safety improvement works would be re-tendered. In fact, the former manager of the Building, Land Asia Management Limited (“Land Asia”), had previously chosen one “Suen Tat Metal Machine Factory Limited” to be the contractor for the fire safety improvement works. 7.On 19 January 2002, the Fire Safety Committee resolved to engage Archidesign & Associates Limited (“Archidesign”) as the consultant and the authorized person in respect of the fire safety improvement works. 8.On 21 January 2002, the Fire Safety Committee opened 3 tenders for the fire safety improvement works. Together with the 5 tenders obtained by Land Asia earlier, the Fire Safety Committee resolved to pass the 8 tenders for the fire safety improvement works to Archidesign for analysis. 9.In February 2002, Archidesign prepared a Tender Analysis Report in respect of the 8 tenders (“the Report”). In paragraph 2.3 of the Report, under the heading “ARITHMETICAL CHECK”, Archidesign stated that Global Engineering (HK) (“Global”) was the only tenderer that complied with all the requirements and in order. However, in paragraph 4.2 of the Report, under the heading, “CONCLUSION”, Archidesign suggested that an interview be conducted with the two qualified tenderers, i.e. Global and Alliance Building Service Engineering Ltd. (“Alliance”). 10.On 28 February 2002, the Management Committee of the Respondent discussed the Report and accepted the suggestion that the tenderers would be separately interviewed for further details and particulars of the tenders. 11.At an owners’ meeting on 7 March 2002, it was resolved that a contractor who could meet the minimum requirements of the Fire Services Department would be appointed to follow up the fire safety improvement works. 12.On 12 August 2002, Mr. Yeung Wai Man, the Chairman of the Respondent, issued a notice to convene an owners’ meeting on 3 September 2002. It was stated in the notice that the following matters were to be discussed: -
13.The above agenda can be translated as follows:-
14.The Respondent contends that the word “resolution” should be impliedly added in paragraphs (1) to (3) above to give the proper meaning of the word “passing”. I agree with the Respondent that the word “passing” in Chinese must refer to “passing resolution” in the context of the notice. 15.At a meeting of the Management Committee of the Respondent held on 23 August 2002, Archidesign reported that the “old tenders” would continue to be used, and that there were 2 qualified finalists, i.e. Global and Alliance. The Respondent resolved that the validity of the tenders would be extended and the Fire Safety Committee would interview the 2 finalists on 28 August 2002. The Fire Safety Committee was to report to the Respondent on its recommendation before 3 September 2002. 16.On 27 August 2002 (i.e. 7 days before the owners’ Meeting on 3 September 2002), Global withdrew its tender. 17.By a further report dated 30 August 2002, Archidesign gave further comments on the tender finalists. 18.On 3 September 2002, an owners’ meeting was held with an attendance of 13.8% of the owners. It was resolved at the meeting that the recommendations of the Fire Safety Committee and the architect’s report be accepted, Alliance be engaged as the contractor for the fire safety improvement works and that each unit of the Building should contribute a sum of $42,000.00 for defraying the costs of the fire safety improvement works. 19.On 9 October 2002, the 2nd and 3rd Applicants paid to the Respondent a sum of $126,000.00, being the aforesaid contributions in respect of the Units. 20.Subsequently, various variation works and Additional Builder’s Works were awarded to Alliance totalling $382,429.50. The Claim 21.The Applicants’ claim is that section 20A of the Building Management Ordinance, Cap. 344 (“the BMO”), has been violated as there was no valid tender to award the contract for the fire safety improvement works to Alliance. Since the Respondent had no power to enter into the contract with Alliance, the Respondent could not ask for contributions from the owners of the Building. The 2nd and 3rd Applicants are therefore entitled to have the refund of $126,000.00 from the Respondent. On 25 July 2003, together with the assignment of the Units, the 2nd and 3rd Applicants transferred the right to claim for the refund to the 1st Applicant. Thus, the 1st Applicant also alleges that it has the right to claim for the refund. The Applicants are asking for the refund of $126,000.00 to either the 1st Applicant or the 2nd and 3rd Applicants as this Tribunal thinks fit. 22.At the trial, the Applicants added another claim for a declaration that the resolutions passed at the owners’ meeting on 3 September 2002 in connection with the acceptance of the recommendations of the Fire Safety Committee and the Architect’s report, and the contributions to be rendered by the owners be void and of no effect. The grounds for applying this relief are that:-
The Issues 23.Mr. Kuan, for the Applicants, submitted that there are 3 issues in this case as follows:-
The First Issue 24.On the first issue, Mr. Kuan submitted that consideration must be given as to whether sufficient information had been given so as to allow the unit owners of the Building to decide whether they would attend the meeting on 3 September 2002, and in this connection, the acts of those responsible for convening the owners’ meeting on 3 September 2002 and in particular, the content of the notice convening such meeting dated 12 August 2002 must be examined. 25.Paragraph 2(2) of Schedule 3 of the BMO states that: -
26.Paragraph 3(7) of Schedule 3 of the BMO states that: -
27.Relying on the aforesaid provisions, Mr. Kuan submitted that the notice did not contain any resolution that was proposed by those managing the Respondent. The content of the notice was coached in very vague terms to the effect that something about the fire safety improvement works were to be decided, and strictly speaking, there was no mention of any proposal intended by those managing the Respondent on the matters to be dealt with at the 3 September 2002 meeting. 28.I do not agree with Mr. Kuan’s submission. As I have already said, the word “passing” in Chinese must refer to “passing resolution” in the context of the notice. There can be no other meaning. It should be clear to any owner that there would be resolutions to be passed in relation to the matters stated in paragraphs (1) to (3) of the notice. Even though the word “resolution” in Chinese was not expressly used in the agenda, I do not find that paragraph 2(2)(b) of Schedule of the BMO has been breached. In fact, the resolutions passed at the meeting on 3 September 2002 were all related to the matters stated in the notice. Paragraph 3(7) of Schedule 3 of the BMO does not invalidate such resolutions. 29.Mr. Kuan further submitted that there was no particulars included or even being made reference to in the notice and that recommendation and suggestion on this important matter was put forth in the meeting and to be decided immediately therein. Mr. Kuan was referring to the non-disclosure of the Additional Builder’s Work in the sum of nearly half a million dollars. Thus, there was nothing in the notice enabling any owner to decide on whether to attend the meeting to vote for or against any proposal or whether to leave the matter to be determined by the majority attending and voting at the meeting. On this point, Mr. Kuan relied on a number of authorities concerning the company law and the fiduciary duty of directors to suggest that apart from the aforesaid statutory requirement, there are other requirements in disclosure of information in respect of the content of businesses proposed to be transacted pursuant to the notice. 30.Mr. Kuan cited the following authorities:-
31.I do not find any of the above authorities helpful. They all concern the fiduciary duty of company directors. I think the duties of a member of an incorporated owners is not the same as those of a company director. An incorporated owners is a statutory creature. Its powers and duties are all governed by the statute, i.e. the BMO. So is a member of the Incorporated owners. I see no justification to impose the equitable principle of fiduciary duty on an incorporated owners or its members. Thus, I find that there is no extra requirement of disclosure of information apart from those laid down in the BMO. 32.In the circumstances, I find that the resolutions of the owners’ meeting on 3 September 2002 regarding the engagement of Alliance as the contractor of the fire safety improvement works and the contribution of $42,000.00 per unit is valid and binding on the owners including the Applicants. The Second Issue 33.Mr. Kuan relied on the Code of Practice on Procurement of Supplies, Goods and Services issued by the Home Affairs Department in July 1997 in pursuance of Section 44 of the BMO, which states that: -
34.Also, section 20A of the BMO stipulates that: -
35.Mr. Kuan submitted that “tender” in this context means “an offer or bid put forward for acceptance” and that the Code of Practice has clearly statutory force. Despite the resolution of the Management Committee on 23 August 2002, which in effect stated that there was no need for any invitation for tender in respect of the Additional Builders’ Work, it does not alter the fact that there was no provision governing the provision of any additional works or variation works in either the Form of Tender or the Conditions of Tender. The Additional Builder’s Work cannot be said as having any relation with the invitation to tender which had held before. Given the sum involved in the Additional Builder’s Work was over HK$10,000.00, it must be procured by invitation to tender and that at least 5 tenders in that regard must be sought. However, nothing to that effect has been carried out by the Respondent. Thus, Mr. Kuan contended that the procurement of the Additional Builder’s Works is in breach of section 20A of the BMO and the Code of Practice, and therefore the portion of contribution for financing such works must either be wholly void or at least voidable. 36.I do not agree with Mr. Kuan on this issue either. There are many authorities as cited by Mr. Choi, for the Respondent, that the Code of Practice is only directory in nature. The Code provides standards and guidelines for the procurement of supplies, goods or services required by a corporation and procurement by invitation to tender of any supplies, good or services under subsection (2) of section 20A and the tender procedures in respect thereof. The Code of Practice are not rules of law and are not mandatory in nature (see Pokfulam Development Limited and others v. The incorporated Owners of Scenic Villas, LDBM 70/2000, as endorsed by the Court of First Instance in Incorporated Owners of million Fortune Industrial Centre v. Jikan Development Ltd. & Another, [2001] 3 HKLRD 588 and the Court of Appeal in 麗苑業主立案法團對韓炳基及柳愛華CACA 1716/2001. ). 37.Also, the Court of Final Appeal, in Mexon Holdings Ltd. v. Silver Bay International Limited [2000] 2 HKC, held that the Code of Practice (in this case on provisions of Means of Excape) was for the guidance of authorized persons and other responsible for the design of new buildings. Thus, I do not find that the Code of Practice has any statutory force as suggested by Mr. Kuan. 38.Although in Wong Tak Keung Stanley v. The Managemetn Committee of the Incorporated Owners of Greenville House CACV 244/2003, the Court of Appeal queried whether the previous cases were rightly decided, it did not give a conclusion on whether s.20A (1) is mandatory or directory. In the circumstances, the decision of CACV 1716/2001 is binding on this Tribunal. 39.Moreover, the BMO does not expressly state the legal consequence of non-compliance of a Code of Practice. Section 44(2) only states that a failure on the part of any person to observe any Code of Practice shall not of itself render that person liable to criminal proceedings of any kind but any such failure may, in any proceedings whether civil or criminal including proceedings for an offence under the BMO, be relied upon as tending to establish or to negative any liability which in question in those proceedings. The decision of CACV 1716/2001 makes it clear that section 44(2) does not make a resolution void because of non-compliance of a Code of Practice. 40.By the same token, the procurement of other variation works, not being part of the Additional Builder’s Work, will not affect the validity of the resolutions. The Third Issue 41.Paragraph 6 of the Code of Practice state that all tenders shall be opened at the same time in the presence of at least 3 members of the Management Committee. Of the 8 tenders, 5 of which were opened first whilst the remaining 3 were opened on 21 January 2002. Mr. Kuan therefore submitted that it was a breach of paragraph 6 of the Code of Practice. Accordingly, it was also a breach of Section 20A(1) of the BMO, which states that such procurement shall comply with such standards and guidelines as may be specified in a Code of Practice. The procurement of the Original Works was therefore void or at least voidable. 42.The same arguments apply here as for the Second Issue. I do not find that a breach of the Code of Practice would render a resolution void or voidable. Estoppel by Convention 43.Even if the Applicants can successfully claim that the resolutions passed on 3 September 2002 were defective, the Applicants are precluded form having of the refund of the contributions by virtue of the doctrine of estoppel by convention. Estoppel by convention may arise where both parties to a transaction act on assumed state of facts or law (see Chitty on Contract, 29th ed. Para 3-107). 44.The Respondent as well as the 2nd and 3rd Applicants had acted on the assumption that the resolutions of the Respondent on 3 September 2002 were valid. The 2nd and 3rd Applicants had paid the contributions to the Respondent, and the Respondent had used the money to carry out the fire safety improvement works. The parties are now precluded from denying the truth of that assumption, as it would be unjust or unconscionable to go back on it. 45.The 2nd and 3rd Applicants did not raise any objection about the validity of the relevant resolutions nor did they object to the contributions in October 2002. It was only when the Respondent commenced legal proceedings in the Small Claims Tribunal against the 1st Applicant on 17 May 2004 then the 1st Applicant raised such claim against the Respondent. By that time, the fire safety improvement works had been completed and money collected from the owners had been paid to Alliance for services provided. It would be unjust and unconscionable to refund the contributions to the Applicants since the money had been spent and the other owners of the Building had made their respective contributions. Conclusion 46.In the circumstances, I find that the Applicants are not entitled to the refund of $126,000.00 or the declaration sought. Their claims must be dismissed. 47.I therefore order as follows:-
Mr. KUAN Man-chun of Messrs. Tsang, Chan & Woo for the Applicants. Mr. CHOI Wing-pong Benny of Messrs. Chui & Lau for the Respondent. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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