Chow Sin Yee, Theresa v. Tang Chi Tak and Others
Read the full judgment text of CACV 145/2009 on BabelCite. This Court of Appeal judgment was delivered on 14 April 2010.
1. There are three actions: HCA 3689/2003, HCA 3986/2003 and HCA 855/2004. They concern Jade Plaza, a mixed commercial and residential development consisting of four towers in Tai Po with about 900 owners.
Cited by 2 cases · Cites 1 case
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CACV 145/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 145 OF 2009 (ON APPEAL FROM HCA NO. 3689 OF 2003) ____________ BETWEEN
____________ AND (ON APPEAL FROM HCA NO. 3986 OF 2003) ____________ BETWEEN
AND BETWEEN
AND BETWEEN
____________ AND (ON APPEAL FROM HCA NO. 855 OF 2004) ____________ BETWEEN
____________ Before: Hon Tang VP, Yuen JA and Kwan JA in Court Dates of Hearing: 13 and 14 April 2010 Date of Judgment: 14 April 2010 Date of Reasons for Judgment: 26 May 2010 ________________________________ REASONS FOR JUDGMENT ________________________________ Hon Tang VP: Introduction 1.There are three actions: HCA 3689/2003, HCA 3986/2003 and HCA 855/2004. They concern Jade Plaza, a mixed commercial and residential development consisting of four towers in Tai Po with about 900 owners. 2.The 1st to 166th plaintiffs in HCA 3986/2003 are some of the owners. They were the only plaintiffs when the writ was issued on 28 October 2003. Although the 1st plaintiff, Chow Sin Yee, Theresa (“Ms Chow”), has provided a witness statement she has since dropped out of the proceedings. 3.The 167th plaintiff is the incorporated owners of Jade Plaza (“the IO”) which was added on 23 April 2004. At the commencement of the proceedings in HCA 3986/2003, the IO was the 16th defendant. Unless otherwise stated, whenever I refer to the plaintiffs, I refer to the 2nd to 167th plaintiffs in HCA 3986/2003. I refer to the 2nd to 166th plaintiffs as the personal plaintiffs. 4.These proceedings arose out of disputes over the proper management of the affairs of Jade Plaza in Tai Po, including those pertaining, but, not limited, to certain cleaning contracts (HCA 3698/2003), and a renovation contract dated 13 August 2003 (HCA 3986/2003). 5.The occupation permit of Jade Plaza was issued in 1986, and in 2000, a management committee consisting of 9 persons was appointed under and in accordance with section 31C of the Building Management Ordinance, Cap. 344 (“the 1st management committee”). The owners was incorporated on 7 March 2001. HCA 3986/2003 6.The 2nd defendant in HCA 3986/2003, namely Mr Tang Chi Tak (“Tang”), was the chairman of the 1st management committee and the 4th defendant Wong Yuk Ming (“Wong”), its treasurer. The 10th to 15th defendants were the other members of the 1st management committee. The 1st defendant, Tapbo Construction Company Limited (“Tapbo”) was the contractor who had entered into a disputed renovation contract with the IO dated 13 August 2003 (contract price HK$42,190,990) (“the renovation contract”). The termination of the renovation contract is the subject of Tapbo’s counterclaim. 7.On 31 July 2003, at the second Annual General Meeting (“AGM”) of the IO, a new management committee consisting of 9 members were elected (“the 2nd management committee”). It no longer matters but the validity of their election was disputed and this management committee was referred to in the plaintiffs’ pleadings as the purported management committee. Tang and Wong were respectively the Chairman and treasurer of the 2nd management committee. The 2nd, 3rd, 5th to 9th defendants were elected on 31 July 2003 as members of the 2nd management committee, and had been joined as such. The 9th member, Ms Chan Ngar Tun, had resigned prior to the commencement of any of these proceedings and was never joined as a party. 8.Universal Housing Engineering Consultants Limited (“Universal”) was joined as the 2nd defendant by the plaintiffs’ counterclaim to counterclaim of Tapbo in HCA 3986/2003. Universal was employed under a consultancy agreement made between the IO and Universal dated 30 December 2002. That agreement was entered into following an invitation to tender. 9.At all material times, a company known as Success Property Company Limited later known as Success Property Management Company Limited (“Success”), were the management company of Jade Plaza. It appears that the validity of the employment of Success as manager is or may be the subject of dispute in other proceedings. 10.At trial, only three parties were legally represented. They were the plaintiffs in HCA 3986/2003 (as well as in the other two actions), Tapbo and Universal. Tang and Wong appeared in person. However, because both Tang and Wong had failed to provide witness statements, they were not permitted to give evidence. None of the other defendants took part in the proceedings. The pleadings (in their final form) in the three actions totalled 174 pages. 11.At trial, the plaintiffs in all three actions were represented by Mr Andrew Mak and Ms Joyce Chan. Tapbo was represented by Mr Anthony Chow, and Universal was represented by Mr Stephen Yeung. On appeal, Mr Edward Chan, SC, appeared with Mr Andrew Mak and Ms Joyce Chan, for the plaintiffs. Mr Anthony Chan, SC and Mr Anthony Chow, appeared for Tapbo, and Mr Stephen Yeung appeared for Universal. Tang and Wong appeared in person. The other defendants were absent. The claim against the 7th, 10th and 13th defendants in HCA 3986/2003 had been discontinued. The claim against the 6th defendant in HCA 3689/2003 had also been discontinued. In the afternoon of the first day of the appeal, the plaintiffs abandoned all their claims against all the personal defendants except Tang and Wong. HCA 3689/2003 12.HCA 3689/2003 was commenced on 3 October 2003 with 143 plaintiffs, who were individual owners of units in Jade Plaza, headed by Ms Chow. The IO was added as the 144th plaintiff on 21 February 2005. The eight defendants were Tang and Wong and the six members of the 2nd management committee. 13.A dispute in HCA 3689/2003 was over a notice dated 16 August 2003 requiring the convening of a general meeting. As a result of certain consent orders, a general meeting was held and a new management committee replacing the 2nd management committee was elected on 30 November 2003. One consequence of this is that the IO had terminated the renovation contract which has led to Tapbo’s counterclaim in HCA 3986/2003. Another dispute related to a purported cleaning service agreement dated 17 October 2002 and another purported cleaning agreement dated 17 August 2003 which I will deal with in some detail later. HCA 855/2004 14.HCA 855/2004 was commenced on 14 April 2004. The IO was the plaintiff and Tapbo, its only defendant. By this claim the IO sought to restrain Tapbo from proceeding with its reference to arbitration under its notice dated 20 December 2003. The only live issue at trial was the costs of the action. That was resolved in favour of Tapbo. There is no appeal. The trial 15.After a 7-day trial, Chung J dismissed the claims in both actions with costs and ordered the 2nd to 167th plaintiffs to pay Tapbo the sum of $8,773,358.14 for work done and unpaid for, loss of profits caused by the plaintiffs’ breach of the renovation contract in the amount of HK$6,184,200.09 and miscellaneous losses in the amount of HK$522,185.56 with interests. The Appeal 16.The original Notice of Appeal exceeded 40 pages in length and contained eight grounds which occupied over 20 pages. The live issues on appeal have been identified in the plaintiffs’ skeleton submission as follows:
1st Issue: The cleaning contracts 17.The first issue is whether there was a breach of fiduciary duties on the part of Wong in obtaining a cleaning contract in 2002 and in August 2003. There is no dispute that Wong was beneficially interested in the cleaning contractor. It is not very clear from the evidence whether the cleaning contractor was Universal Environmental Cleaning Services Company Limited or Universal Environmental Cleaning Services Company, a firm. It does not seem to matter and I will refer to them as “the cleaner”. The 2002 contract has not been produced. It is common ground that many documents relevant to HCA 3689/2003 and HCA 3986/2003 have not been produced. But it appears from the minutes of an “urgent management committee meeting” held on 28 August 2002 that the cleaning company then employed by the IO had had its contract terminated because it had used illegal workers. The minutes stated in terms that Wong’s cleaning company should be employed as cleaner, pending an invitation to tender. That was duly done. There were six tenders and in a notice dated 15 September 2002 Success informed the IO that the cleaner was successful. That was followed by a letter of complaint dated 4 October 2002 signed by Ms Chow and about 30 owners. In para. 7 of that letter the chairman of the IO (Tang) was asked to explain how it was that Mr Wong’s company had obtained the cleaning contract. I should add that accompanying the tender by Mr Wong’s company was a declaration that Mr Wong was the treasurer of the IO. Thus, it is quite clear that there had been a disclosure of Wong’s interest. I believe Mr Edward Chan no longer complained about Wong’s breach of fiduciary duty in relation to the 2002 contract. He complained, however, of the non-disclosure of Wong’s interest in the cleaner before the August 2003 contract was obtained. He pointed out that as a result of the AGM held on 31 July 2003, only two of the former 9 management committee members remained on the 2nd management committee, namely Tang and Wong. The other seven were new to the management committee. Mr Chan submitted that these new management committee members were not aware of Mr Wong’s interest in the cleaner. However, there is no evidence that they were indeed unaware of Wong’s interest in the cleaning company. On the evidence, including Ms Chow’s letter of complaint, that seems unlikely. 18.I do not believe this complaint has been established. Mr Edward Chan also complained that section 20A(2) of the Buildings Management Ordinance, Cap. 344, which was then in force, required the 2003 cleaning contract to be procured by invitation to tender, and that section 20A(3) required:
19.Para. 8 in Appendix B of the Code of Practice required that tenders exceeding certain values (which the cleaning contract had exceeded):
20.In Wong Tak Keung Stanley v Management Committee of The Incorporated Owners of Grenville House [2004] 2 HKC 194, the judgment of Yuen JA (Cheung JA agreeing) supports the view that para. 8 of the Code had:
21.Yuen JA went on to say that:
22.Although not included in the appellant’s list of issues (nor pleaded), the plaintiffs complained that there had been no invitation to tender regarding the 2003 cleaning contract. The pleaded complaint was that the 2003 cleaning contract had not been approved at a general meeting. It appears from the closing submissions of Tang and Wong that they claimed that there was a tender (para. 9.6 and 19.10 of their closing submissions respectively). As stated above the learned judge refused their permission to testify because they had not provided witness statements. So there was no direct evidence from them. But I do not believe the appellants can rely on absence of an invitation to tender nor am I satisfied that that had been established. 23.However, I accept that whether there had been a tender, there was no resolution at a general meeting to accept the relevant tender. 24.I do not believe it matters. The 2003 cleaning agreement was for four years from 15 September 2003 terminable at the end of the first two years by notice. Mr Edward Chan accepted, for the purpose of the appeal, although the facts are far from clear, that the court must proceed on the basis that the 2003 cleaning contract was allowed to run its course (it is not clear whether for the 1st two years only or for the 4 years). That being the case, it is difficult to see what complaint can be made of the lack of an invitation to tender or approval in a general meeting, particularly, in the absence of any evidence of any loss resulting therefrom. Moreover, as will be seen the learned judge had exercised his discretion and upheld the 2003 cleaning contract. 2nd Issue: Failure to convene a general meeting 25.In August 2003, Ms Chow and her associates acting on behalf of a group of owners, requested the IO to convene a meeting. By HCA 3689/2003, a total of 143 plaintiffs headed by Ms Chow commenced proceedings against 8 defendants including Tang and Wong (the other defendants were members of the 2nd management committee) for, inter alia, an order that a general meeting of the corporation be convened pursuant to a notice dated 16 August 2003. Eventually, by consent orders, dated 17 October 2003, and 11 November 2003, respectively, Lam J ordered that Tang as chairman of the management committee should convene a general meeting on 30 November 2003. Costs were reserved. A meeting was duly held as a result of which a new management committee was elected who were sympathetic to the complaints of these plaintiffs. In due course the IO was added as the 144th plaintiff. However, whether a general meeting ought to have been convened (which depended on the validity of the signatures on the requisition) was never resolved. 26.Chung J awarded costs to Tang and Wong against the 2nd to 144th plaintiffs. Apart from the order against the personal plaintiffs, I see no reason to interfere. 3rd Issue: Renovation contract 27.On 21 November 2002, Success advertised for tender for a consultant in respect of the intended renovation contract. Universal was eventually successful. In December 2002, the IO entered into a consultancy agreement with Universal. The contract sum was HK$60,000. The contract required Universal to assist the IO in the tender process to ensure that the tender process was conducted fairly, with a sufficient degree of transparency. 28.On 27 January 2003, at the first AGM, Mr Wong Man Hong of Universal presented the findings of a surveyor’s report on Jade Plaza by a PowerPoint presentation which had taken about 30 minutes. That was followed by a question and answer session. 29.Following its employment, on 13 March 2003, Universal issued a questionnaire to the owners regarding the condition of Jade Plaza. On the same day, Universal in the name of the IO advertised an invitation to prequalify for tender purposes. There were 22 responses and on 21 March 2003, an analysis in respect of them was prepared by Universal. At a management committee meeting held on 11 April 2003, it was resolved that 15 of them be invited to tender and tender documents were supplied to each of them with an invitation to tender. The tender document is a substantial document of about 15 pages. A total of 15 tenders were received by the cut-off date of 12 May 2003. Tapbo’s tender at $42,665,710 was the lowest with the highest at $51,346,470. 30.In May 2003, photographs from the January survey were posted in the lobby. Universal had also provided information regarding the proposal on 6 A1-sized panels and passed them to Success for display. They were on display on notice boards until August 2003. 31.An analysis of the tender dated 16 May 2003 was produced by Universal. On 16 May 2003, at a management committee meeting, after considering Universal’s report, the management committee decided to select the six lowest tenderers for an interview. By a notice dated 17 May 2003, Tapbo were invited to attend for an interview. A total of six contractors were invited for an interview. A notice dated 17 May 2003 was issued by Success to the owners informing owners of the various times of interview inviting them to attend. 32.On 20 and 21 May 2003, Universal together with the members of the 1st management committee interviewed six of the tenderers. 33.The tenderers were asked to re-tender with a cut-off date of 30 May 2003. That was done, Universal supplied a further analysis of the six tenders on 30 May 2003. 34.On 21 May 2003, Universal issued a notice to all the owners with photographs of a survey for the owners’ consideration. 35.In a minutes of meeting held at 6:45 pm on 16 June 2003, it was disclosed that Tapbo’s tender was lowest at $40,959,110 and the highest was $43,949,500 and that Universal recommended that the six lowest tenders be presented to the general meeting for its decisions. The management committee decided to convene a meeting of the general meeting of the owners in July 2003. The minutes of the 16 June 2003 meeting were posted in the lobby. 36.By a notice dated 1 July 2003, a general meeting of the owners was convened to elect members of the management committee as well as:
37.On 31 July 2003, there was a newsletter for the purpose of the AGM in which the names of the six tenderers as well as their respective tender prices were stated. The meeting on 31 July 2003 was attended by officers from Tai Po District Office as well as the lawyers of the IO. 167 owners out of a total number of 889 owners also attended in person. The learned judge found that by the resolutions of 31 July 2003, the management committee was authorized to select a renovation contractor and to enter into a contract with such contractor (resolutions 5 and 6). The resolutions were passed after the owners had been informed of the tender price of the six tenderers. [Judgment paras. 48 and 49]. He also found that the tenderers were asked to further reduce their tender prices. All except one agreed to reduce their tender prices further. 38.There was also a resolution (resolution (8)) which conferred authority on the management committee to enter into contract with a cleaning contractor. 39.Following the meeting on 31 July 2003, Universal requested the six lowest bidders to re-submit their tenders with further reduced prices by 8 August 2003. All six of them had re-submitted their tenders, Tapbo at $40,909,185 was the lowest, just over $1,000,000 less than the next lowest, and the highest was $43,949,500. These tenders were opened on 9 August 2003 at a management committee meeting, where it was resolved:
40.Universal prepared an analysis and score dated 9 August 2003 in respect of the three lowest tenders. 41.By letter dated 11 August 2003, Universal wrote to Tapbo asking Tapbo to attend a meeting on 12 August 2003. On 12 August 2003, a letter of intent was signed by Tapbo, Universal and Tang for the IO. That was done in the presence of a number of the members of the 2nd management committee. On 13 August 2003, Tapbo was asked to go to the office of the IO to sign the renovation contract. Later the renovation contract signed by Tang was supplied to Tapbo. 42.Various complaints had been made about the renovation contract, including, the validity of the meeting on 31 July 2003. The complaints have been rejected by the learned judge. 43.Mr Edward Chan’s third issue relates to the authority of Tang to sign the renovation contract. That is put on two bases. First, that Tang had not been authorised by the second management committee to sign the renovation contract. Secondly, there was no valid resolution of the IO. Whether authorised by the management committee 44.There is no direct evidence that Tang had not been authorised by the second management committee. The most one can say is that no formal resolution has been produced. But, it is common ground that the record is not complete. At para. 41 of the judgment, the learned judge held that the management committee was aware of and had agreed with the signing of the renovation contract. So the complaint that Tang had acted on his own cannot be sustained. Mr Edward Chan’s submission on ostensible authority of Tang as chairman (as well as Mr Mak’s submission below) depended on the allegation that Tang had not been authorised by the management committee. Since the learned judge has held that Tang had been authorised by the management committee, a conclusion with which I agree, it is unnecessary to consider whether Tang had any ostensible authority. Whether authorised by the IO 45.The second complaint is that Tapbo’s tender had not been approved by the owners in general meeting. Mr Edward Chan submitted that the approval on 31 July 2003 was not an approval of the acceptance of the Tapbo tender. He further submitted that since Tapbo had subsequently been asked to reduce the tender price and had done so, that was a new tender. The learned judge was of the view that the resolution of 31 July 2009 was a sufficient compliance with section 20A(3). 46.As noted, section 20A(3) of the Building Management Ordinance, in force at the relevant time, required that “the tender procedure … shall comply with … Code of Practice” and that para. 8 of the Code required tenders exceeding a certain value to be submitted to the corporation, “which may, by a resolution … at a general meeting … accept or reject them.” 47.In Grenville House, Yuen JA had expressed the view that a consequence of not complying with the Code may be that the subsequent contract is wholly void or voidable. 48.Section 29 of the Building Management Ordinance provides:
I am inclined to the view that, section 20A(3) required that the renovation contract (and the 2003 cleaning contract too):
49.Even so, it is the management committee which would carry a resolution of the corporation into effect. 50.We have heard no or inadequate submission on whether a management committee has any ostensible or apparent authority to bind an incorporated owners. I do not decide the point but am inclined to think that there is much to be said in favour of a positive answer. 51.Mr Edward Chan also submitted that the validity of the resolution would depend on whether sufficient information had been disclosed to the owners prior to the meeting. In other words the apparent passing of a resolution may not be sufficient. It is also unnecessary to determine whether this is so. But this supports the view that a third party should be entitled to rely on section 29 of the Buildings Management Ordinance since it would not be in a position to know whether a resolution has been passed or properly passed. 52.I share the view that owners at a general meeting may delegate to a management committee the final decision on selection so as to avoid the delay and trouble of a further general meeting (it appears that in the present case, it was necessary to arrange for an outside venue to hold an AGM). For example, I can see no objection to the owners in general meeting delegating to a management committee the decision to select a tenderer out of a final list of six, after further efforts to obtain lower tender prices from them. That was the learned judge’s view (para. 42). With respect, I am inclined to agree. But, it is unnecessary to decide the point. Discretion 53.The learned judge also upheld the validity of the renovation contract and the 2003 cleaning contract on the basis that he has a discretion to do so. 54.The Building Management Ordinance has been amended in 2007 (I will refer to the new provisions as the 2007 amendments). Section 20A now provides that all relevant supplies, goods or services,
55.Section 20A(2B) now provides that:
56.Section 20A(6) also provides that where subsections (2) or (2B) had not been complied with, the contract shall not be void but may be avoided by the corporation by a resolution of the owners passed at a general meeting subject to any order made by the court under subsection (7). 57.Under subsection (7) the court may:
58.It appears from the voluminous written closing submissions filed after the conclusion of the hearing at trial, that Tapbo contended that the 2007 amendment did not have retrospective effect. See 2.3.1 of Tapbo’s closing submissions dated 9 December 2008. The plaintiff had supplied a total of six undated written closing submissions. In the written submission on section 20A of Building Management Ordinance, it appears that (para. 14) the plaintiffs contended that the 2007 amendments were retrospective in effect. 59.However, in para. 51 of the judgment, the learned judge proceeded on the basis that the plaintiffs had contended that the 2007 amendment were not retrospective in effect but that the plaintiffs had agreed that the Court has a similar discretion. The learned judge, however, did not decide whether the 2007 amendments have retrospective effect. We have heard no submission on this. I express no view. 60.Be that as it may, the parties had proceeded below on the basis that the court had the same discretionary power. Chung J also proceeded on that basis. He held that in exercise of his discretion he would uphold the renovation contract as well as the 2003 cleaning contract. The lengthy notice of appeal raised no objection to that approach. Nor was it raised in the appellants’ written skeleton submission. However, in the course of Mr Edward Chan’s submission, he sought to argue that the approach was wrong and that the court had no discretion in the matter. We indicated our unwillingness to entertain a new argument raised without any prior warning. And Mr Chan did not press the point. We believe we should proceed on the assumption that the court indeed has a discretion. But as we have heard no submission on the matter, we do not decide the point. On the basis that the court has a discretion, we have no doubt that the learned judge’s exercise of discretion in favour of upholding the renovation contract as well as the 2003 cleaning contract is correct. 61.Once it is accepted that the Court has a discretion in upholding a contract notwithstanding failure to comply with para. 8 of the Code, I do not believe there is any room for the argument that a non compliant contract is void. 4th Issue: Whether Tapbo had notice of irregularities 62.This complaint is raised in para. 4 of the grounds of appeal. None of the points raised is valid and rightly not pressed by Mr Chan. In any event, the learned judge had in his discretion upheld the renovation contract. 5th Issue: Quantum 63.This only arises if the renovation contract was not binding. 6th Issue: Universal in breach of duties 64.This issue is about whether Universal was in breach of contractual duties because the tender process was not transparent and valid, and whether they had failed to ensure proper certification of work. 65.The learned judge was of the view that the tender process was transparent. With respect, I agree. 66.On proper certification of work, whilst I agree that Universal’s certification could be faulted in part, Mr Chan has rightly accepted that no consequence flows from that, since the learned judge had not relied on any of the certificates. Orders against individual plaintiffs 67.Lastly, as noted above, the judgment in favour of Tapbo was entered against the individual plaintiffs as well as the IO in both HCA 3986/2003 and HCA 3698/2003. We have given leave to the individual plaintiffs to amend their notice of appeal to challenge that. As a result, the judgments in favour of Tapbo against the individual plaintiffs were set aside. Tapbo’s counterclaim which was based on the renovation contract was made and could only have been made against the IO. We also set aside the cost orders made against the individual plaintiffs. It was rightly accepted that both actions were brought for the benefit of the IO and that the presence of the individual plaintiffs had not resulted in any extra costs. For the same reason the costs order in favour of Universal was also amended. 68.Save as aforesaid, we have dismissed the appeal with costs in favour of Tapbo, Universal, Tang and Wong against the IO only. We made no order as to costs in favour of or against any of the personal plaintiffs whether involved as plaintiffs or defendants. Hon Yuen JA: 69.I agree with Tang VP’s reasons. Hon Kwan JA: 70.I agree with the reasons for judgment of the Vice-President.
Mr. Edward Chan, SC, Mr. Andrew Mak & Ms Joyce Chan, instructed by Messrs K.B. Chau & Co. and Messrs Chung & Kwan, for the Appellants/Plaintiffs Mr. Anthony Chan, SC & Mr. Anthony Chow, instructed by Messrs So, Lung & Associates, for Tapbo Construction Company Limited Mr. Stephen Yeung, instructed by Messrs Huen & Partners, for Universal Housing Engineering Consultants Limited Other Respondents/Defendants: Tang Chi Tak, in person, Present Wong Yuk Ming, in person, Present Fong Hon Tat, in person, Absent Chong Chi Ming, in person, Absent Lee Chong Yin, in person, Absent Cheung Sau Kiu, in person, Absent Wong Yuk Fung, in person, Absent Yau King Chu, in person, Absent Tse Yat Ming, in person, Absent Lui Yan Shing, in person, Absent To Kwai Fun, in person, Absent | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment