Management Committee’s failure to step down does not leave a power vacuum

Even though a Management Committee has not stood down as required by the Building Management Ordinance, it does not cease to be the Management Committee of the Incorporated Owners with the rights and duties that that entails.

In Incorporated Owners of Finance Building v Bright Hill Management Consultants Ltd ([2001] HKEC 1431, CA) the plaintiffs were the incorporated owners of Finance Building in Des Voeux Road Central. Bright Hill was one of the owners. In 1997, a dispute arose concerning the management charge and Bright Hill refused to pay. The DMC allowed unpaid management charges to be secured by a charge over the property of the defaulting owner. Two charges were registered at the Land Registry. The Incorporated Owners applied to the court seeking the sale of the property. Bright Hill counterclaimed seeking among other things, a declaration that the registered charges were invalid and their removal from the register. The Lands Tribunal stopped the proceedings and dismissed both the application and the counterclaim. It did so because the original Management Committee had not stepped down to be re-elected or replaced as required by the terms of the Second Schedule to the Building Management Ordinance. As a result, the Land Tribunal decided, it was not empowered to bring or defend proceedings on behalf of the company.

By a majority, the Court of Appeal overturned this decision and returned both the application and the counterclaim to the Land Tribunal. A management committee’s failure to step down did not mean that it ceased to be the lawful management committee of the corporation.

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