Chan Yip Keung and Another v. The Incorporated Owners of Belvedere Garden Phase Ii and Another

[English Translation – 英譯本]
LDBM 54/2002

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 54 OF 2002

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BETWEEN

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Before: Mr Stephen Chow, Presiding Officer

Date of Judgment:    9 September 2002

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JUDGMENT

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1.In the present case, I have to determine the following applications by the Applicants against the 1^st Respondent (hereinafter “the Respondent”):

(4A)     An order to dissolve the 3^rd Management Committee pursuant to section 31 of the Ordinance.

(4B)     An order to appoint an Administrator pursuant to section 31 of the Ordinance to:

(i)      convene a general meeting of the Owners Incorporated for the purpose of electing a new Management Committee of the Owners Incorporated of the dissolved 3^rd Management Committee and to replace the 4^th Management Committee notwithstanding the same having been purportedly elected in the inquorate Annual General Meeting held on 12^th December 2001; and

(ii)     carry on and perform the functions and powers of the Management Committee and on such terms and conditions as to remunerate or otherwise as this Tribunal thinks fit until such time when the new Management Committee, duly elected as aforesaid, has assumed office.

2.The 3^rd Management Committee

On 9 August 2002, I made the following ruling on the basis of the facts as agreed by the Applicants and the 1^st Respondent: as from 16 January 2002, the 3^rd Management Committee consisted of only 8 members. This fell short of the statutory requirement of 9 members. Although the 3^rd Management Committee still existed (as it had not been dissolved), it lacked the statutory quorum for convening a meeting of the Management Committee; it was unable to perform its own functions as it could not possibly convene a lawful meeting to deal with the affairs of the Incorporated Owners.

3.The 4^th Management Committee

The abovementioned agreed facts reveal that, apart from the 3^rd Management Committee, a 4^th Management Committee of the Incorporated Owners is also in existence:

1.   The 4^th Annual General Meeting of the Incorporated Owners of Belvedere Garden Phase II (“4^th AGM”) was held on 16^th July 1999. At the 4^th AGM, the number elected to the 3^rd Management Committee was 17. 17 members were duly elected during the 4^th AGM and took office.

2.   …

3.   The 5^th Annual General Meeting of the 1^st Respondent (“5^th AGM”) was held on 12 December 2001. The number elected to the 4^th Management Committee was 19.

3.1 At an annual general meeting held on 12 December 2001, a resolution was passed in relation to a legal action to be determined by the Lands Tribunal (hereinafter “the Tribunal”). The action was instituted by Chan Lit Hung on 20 December 2001 in the Tribunal (case number: LDBM No. 577/2001). In the action, Mr Chan applied for the following orders against the Incorporated Owners:

(1)     A Declaration that all the resolutions passed in the Annual General Meeting of the Respondent held on the 12^th day of December 2001 (“the AGM”) was void and of no effect;

(2)     A Declaration that the Continued Meeting initially scheduled to take place on 21^st December 2001 was invalidly convened;

(3)     An Order that a new Annual General Meeting of the Respondent to be held as soon as possible.

4.The relevant statutory provisions

The Applicants’ applications are based on section 31 of the Building Management Ordinance (hereinafter “the Ordinance”), which provides as follows:

(1)     The Tribunal may, upon application made to it by —

(a)     an owner;

(b)     a registered mortgagee (if any);

(c)     an administrator; or

(d)     the Authority or an authorized officer,

dissolve the management committee and appoint an administrator, or remove and replace an administrator, as the case may be.

(emphasis added)

4.1 I first have to determine whether section 31 requires the Tribunal to appoint an administrator when it dissolves the management committee. Ms Young for the 1^st Respondent submitted that the word “and” should be interpreted as “or”. The word “or” appears twice in section 31(1) of the Ordinance. If “and” were to be taken as the equivalent of “or”, why, one may ask, did the legislature not use “or” in place of “and”? Furthermore, as far as the appointment and removal of an administrator are concerned, the section uses the words “and” and “or” respectively. If “and” were to be equal to “or”, why is “or” not simply used in place of “and”? This clearly shows that “and” and “or” are intended to bear different meanings.

4.2 If the word “and” were to be taken to mean “or”, the Tribunal would not have to appoint an administrator after dissolving the management committee, thereby creating a vacuum in the management of the Incorporated Owners. This could not have been the intention of the legislature. It is natural and logical for the Tribunal to appoint an administrator when it dissolves the management committee so that the management of the Incorporated Owners can continue uninterrupted.

5.Should the Tribunal dissolve the 3^rd Management Committee?

Should I order that the 3^rd Management Committee be dissolved despite my ruling that it is no longer able to convene meetings? The first issue to be resolved is: as between the Incorporated Owners and the 3^rd Management Committee, who is the correct Respondent? Under section 29 of the Ordinance, the management committee merely exercises and performs on behalf of the incorporation the powers and duties conferred by the Ordinance on the incorporation. The management committee is an entity distinct from the incorporation. Furthermore, section 45(2) of the Ordinance empowers the management committee, an incorporation and other persons to commence proceedings specified in Schedule 10. This shows that the management committee and the incorporation are two distinct bodies. As the management committee is entitled to commence proceedings, it can of course become a party to the proceedings.

5.1 Schedule 10 to the Ordinance concerns the hearing and determination of specified proceedings by the Tribunal. Paragraph 5 of Schedule 10 provides as follows:

5. Proceedings relating to any question of law concerning the powers and duties of —

(a)     a corporation;

(b)     a management committee, and of the chairman, secretary and treasurer thereof;

(c)     a manager within the meaning of section 34D(1);

(d)     an owners’ committee within the meaning of that section;

(e)     the tenants’ representative,

including such powers and duties (if any) of a financial, pecuniary or fiduciary nature.

5.2 Section 34D(1) of the Ordinance provides that, in relation to a building, “owners’ committee” means:

(a)   a management committee, where a management committee has been appointed under section 3, 3A, 4 or 40C; or

(b)   where no such management committee has been appointed, the committee of owners (howsoever named) formed under and in accordance with the deed of mutual covenant in respect of the building.

For the purpose of paragraph 5(d), a management committee can become a party to the proceedings.

5.3 Where the Tribunal makes an order against an owners incorporation for the dissolution of the management committee, as the order is one for dissolving the committee and not one requiring the incorporation to dissolve the committee, the incorporation is, in the absence of an order by the Tribunal requiring it to do so, not under any legal duty to dissolve the committee. On the other hand, as the committee is not a party to the proceedings, the above order cannot be enforced against it. As the Applicants are taking out proceedings under section 31, they must name the “Management Committee” as the Respondent.

5.4 The Applicants relied on section 18(2)(g) of the Ordinance, which empowers the Incorporated Owners to act on behalf of the owners in respect of any other matter in which the owners have a common interest. The Applicants said:

The dissolution of a management committee must be a matter of common interest to the owners. By virtue of s.29, the proper construction of s.18(2)(g) must mean the owners’ corporation includes the management committee, or alternatively, that when the owners’ corporation so acts, its act is binding on the management committee and the owners.

The power conferred upon the Incorporated Owners by section 18(2)(g) is a discretionary power, and under section 29, the Management Committee is no more than an entity which performs the functions of the Incorporated Owners on their behalf. Under section 18(2), the Incorporated Owners are the party who actively exercises the power; but as a Respondent, they are put in a passive position. Section 18(2) does not apply to this case because no question arises as to the exercise by the Incorporated Owners of their discretion.

5.5 The Applicants also put forward the following reasons in purported support of their contention that it is not open to the Management Committee to deny that it is bound by the order requiring its dissolution:

10.    Here in 4.02 R1 has not convened any general meeting to pass a resolution to defend the present application. It follows that it defended the present action through the Management Committee. This is further evidenced by the active participation of Madam Ng Pui Har who is the vice-chairman of the Management Committee at the hearing and the tendering of her name as a candidate for administrator for the Tribunal’s consideration. In fact in 5.02 Madam Ng in her official capacity issued an open letter to all owners but the present application (p.58 Bundle). There is absolutely no doubt that at all material times the owners including the members of the Management Committee had knowledge, actual or construction, of the present action. However, thus far the Management has not applied to join in as an intervenor. In the premises, the Management Committee is estopped from denying that the Tribunal’s decision to dissolve the Management Committee is binding upon it as well as R1: Incorporated Owners of Block F1 – F7 Pearl Island Flats v. Incorporated Owners of Pearl Island Garden.

5.6 The Applicants’ argument cannot be sustained as there is no evidence in the present case to support what they said in paragraph 10 of their written submissions.

5.7 Paragraphs 12 to 14 of the written submissions concern opposition by individual owners to the Tribunal’s order (for the dissolution of the Management Committee). However, the validity of the opposition by individual owners to the Tribunal’s order is irrelevant to the crucial issue in the present case, which is whether the Incorporated Owners are the correct Respondent.

5.8 The Applicants are applying for an order for the dissolution of the 3^rd Management Committee on the ground that it has lacked the ability to convene meetings since 16 January 2002.  However, the legal status of either of the two Management Committees has a bearing on that of the other. The Applicants have not adduced evidence to show that the 4^th Management Committee has been unlawfully constituted. There can only be one management committee under an owners’ incorporation. If the 4^th Management Committee is lawful, the 3^rd Management Committee cannot lawfully exist, and vice versa. The Tribunal can only make an order dissolving a management committee that lawfully exists, because an unlawful management committee is in fact not a management committee and no question can arise as to whether it is to be dissolved.

5.9 In item (4B) of their applications, the Applicants referred to the 4^th Management Committee “having been purportedly elected in the inquorate Annual General Meeting held on 12^th December 2001”. They have, however, failed to adduce evidence on that Annual General Meeting. I only know that LDBM 577/2001 is a case which involves that Annual General Meeting. Apart from this, the Applicants have neither adduced evidence as to whether the 4^th Management Committee lawfully exists nor requested the Tribunal to make a ruling on the legal status of that Committee. The Applicants have not put forward any reason for replacing that Committee. Until the legal status of the two Management Committees in question is clarified, it is inappropriate for me to make any order for the dissolution of the Committees or either of them.

6.The appointment of administrator

The Applicants request the Tribunal to appoint Ms Sarena Young, a practising solicitor, or Chan Lit Hung as the administrator. The Applicants are represented by the law firm Christine F. L. Ip & Young. Ms Young is one of the partners of that firm and is not personally involved in conducting the present litigation. If she is appointed as an administrator of the Incorporated Owners, then by virtue of section 32(1) of the Ordinance, she will have all the powers and duties of a management committee and of the chairman, secretary and treasurer thereof. Assuming the Respondent intends to apply for a review of or lodge an appeal against my ruling, they will be subject to the administrator’s decisions, and the fact that Ms Young is a partner of the law firm that represents the opposite party in the present proceedings may give rise to a potential conflict of interest. Furthermore, that law firm also represents Chan Lit Hung in LDBM No. 577/2001. As that case has not yet concluded, if Ms Young were to be appointed as an administrator, her capacity as such might be in conflict with her capacity as a partner of that law firm.

6.1 If Chan Lit Hung were to be appointed as an administrator, his capacity as the applicant in LDBM No. 577/2001 would be in conflict with his capacity as an administrator.

6.2 Such conflict will give rise to unfairness. In appointing an administrator, I have to ensure that an order of appointment will not result in unfairness. For this reason, neither Ms Young nor Chan Lit Hung is in my view a suitable candidate for appointment as an administrator.

6.3 I am entitled under section 31(1) of the Ordinance to dissolve a management committee and appoint an administrator. Where it is unable to appoint an administrator, I should not dissolve the management committee in order to prevent a vacuum in the management of the Incorporated Owners.

7.For the above reasons, I dismiss items (4A) and (4B) of the Applicants' applications.

Christine F. L. Ip & Young for the two Applicants.

Li, Wong & Lam for the 1^st Respondent.

Translated by Mr. Edmund Cham, Solicitor.