Archive for the ‘Owners’ meeting’ Category

Do owners of sub-divided units count as owners for general meeting purposes?

September 21, 2016

In Chow Chui Chui v Kafull Investment Ltd ([2016] HKEC 1889, CA) the DMC for a building divided the building by allocating 48 shares to a ground floor shop, 12 shares to each of the first to third floors (the ground to third floors being described as the ‘non-domestic accommodation’), one share to each domestic flat on the floors above the non-domestic accommodation and one share to the main roof and external walls. There was a first sub-DMC that sub-divided the ground floor into five units and allocated the 48 ground floor shares amongst these units. There was a second sub-DMC that sub-divided the units on the first and second floors of the building and divided the shares in the main DMC among the sub-divided units. Resolutions were passed at an owners’ meeting. Present at the meeting were fourteen owners from the non-domestic portion and two from the domestic portion. The question was whether the meeting failed to meet the quorum requirements in schedule 3, para. 5(1)(b) of the Building Management Ordinance (requiring that 10% of the owners should be present).

The contention was that only those who were ‘owners’ in accordance with the main DMC could be considered ‘owners’ for this purpose. Thus, there could only be 4 owners from the non-domestic portion (one for each floor). The Court of Appeal  (Kwan JA giving the Court’s judgment) rejected this contention. Section 2 of the Building Management Ordinance defines an ‘owner’ as one who appears from the Land Registry to be the owner of an undivided share of land on which there is a building. Section 39 of the Building Management Ordinance provides that an owner’s share is to be determined in accordance with a DMC registered at the Land Registry. Here, the shares had been attached to the sub-divided units by the terms of a sub-DMC, the owners of the sub-divided units had the right to exclusive possession and the Land Registry records confirmed their ownership ([35]). They were owners and, as a result, the meeting was quorate.

There was nothing to limit the Ordinance’s references to a ‘deed of mutual covenant’ to the main DMC ([39]) especially where, as here, the main DMC contemplated the possibility of sub-division. In fact, it is enough that the main DMC does not prohibit sub-division ([40]).

Michael Lower

 

Owners’ meeting: validity of decision to dissolve the meeting and of the proceedings of a ‘break-away’ meeting

July 11, 2013

Discovery Bay Services Management Ltd v Hannon Ltd ([2013] HKEC 958, LT) concerned the validity of a decision to dissolve a meeting of the Headland Village Owners’ Committee and of the proceedings of a break-away group of owners who purported to continue the meeting after the chairman had attempted to dissolve it.

There is a DMC for Discovery Bay as a whole and sub-DMCs for the villages within it. There is no owners’ corporation. CM is the manager under the DMC.

CM convened a meeting of the owners of Headland Village to elect the officers of the village owners’ committee for the coming year. The meeting began but was dissolved by the chairman. He dissolved the meeting because he disputed the validity of the appointment of the representative of CM (which was entitled to be present at the meeting and count as part of the quorum  but not to vote). He also contended that the sub-DMC only allowed owners or their spouses or family members to attend and vote. There was no scope to appoint anyone else as a proxy. He contended that the meeting was inquorate if one left ineffective proxies out of account.

A group of owners then went to another room and continued the meeting. They elected new officers. The chairman protested that the meeting was inquorate and its proceedings invalid.

DB sought, and obtained, declarations that the chairman had been wrong to dissolve the first meeting and that the second part of the meeting, and the resolutions passed there, were valid.

The chairman disputed the effectiveness of the letter by which CM appointed an individual to act as its representative at the meeting. The letter had been signed by a director of CM but did not bear CM’s chop or seal. This failed: as a matter of construction, the sub-DMC did not require the company’s chop to be effective. The normal rules for the appointment of an agent were all that mattered and they had been adhered to. In any event, CM had later formally ratified the appointment. This came after the village owners’ meeting but the ratification cured any potential defect in the original appointment.

The chairman contended that the sub-DMC only allowed owners or their spouses or family members to attend and vote. Thus, proxies given to other parties (such as CM) should be ignored. The result was that the meeting was inquorate. The Tribunal confirmed the chairman’s reading of the relevant provisions of the sub-DMC. Even allowing this, however, the meeting was still quorate. (There is an interesting comment at [56] on the idea of a ‘family member’).

Finally, there was the question as to whether the second meeting (or the second stage of the meeting) was quorate. It was. The chairman counted as part of the quorum since he was present even while he vociferously denied the validity of the proceedings. The same was true of the other owners who were of the same view as the chairman.

It was clearly a very lively meeting and there was a police presence nearby for part of it ([72]).

Michael Lower

Building Management Ordinance only vests a cause of action in the Incorporated Owners where it is one common to all owners

October 9, 2012

Incorporated owners can bring proceedings under section 16 of the Building Management Ordinance provided the cause of action relates to common parts and is one enjoyed by all owners (and not only some of them).

Incorporated Owners of One Beacon Hill v Match Power Investment Ltd ([2012] HKEC 1338, CA) concerned proceedings brought by incorporated owners against the developer of the building. The proceedings alleged that sub-standard materials had been used and poor workmanship allowed in the construction process. The developer, Match Power, sought to strike out the action on the basis that the incorporated owners had no locus standi. The relevant duty concerned the common parts but it was a contractual duty owed to only some of the original purchasers: different forms of sale contract were used at different stages of development and only some incorporated the relevant duty. Match Power argued that incorporated owners could only bring proceedings where the relevant duty was owed to all of the owners. They sought to strike out the proceedings.

The Court of Appeal held that the cause of action did not vest in the Incorporated Owners: section 16 of the Building Management Ordinance only made the Incorporated Owners the proper party where the cause of action was one that had accrued to all of the owners ([21]). Section 18(2)(g) is a management power that assumes that the cause of action has already vested in the Incorporated Owners. It is not an independent right to sue. Further, it only gives a power to bring proceedings in respect of matters in which all the owners have the same legal interest ([69]).

The Building Management Ordinance aims to facilitate management of multi-storey buildings owned by several people and to avoid multiplicity of suit. It is not permissible, however, to resort to a ‘purposive’ interpretation of section 16 that would do violence to the plain meaning of the text ([17] – [19]).  Further, there were several reasons why a distinction should be drawn between claims where all owners have the same legal interest and those where only some owners have the interest. If the Incorporated Owners could bring proceedings to enforce the rights of only some of the owners concerning common parts, the decision to enforce (or not) contractual rights owed to individuals would be under the control of the majority of the owners meeting ([30]). The costs and risks of litigation to enforce these rights owed only to some would become the common liability of all ([31]). In cases where the owners were the defendants, the contractual liability of some would become the shared liability of all ([32]).

Conduct of owners’ meetings

September 19, 2011

In general, those present at an owners’ meeting are free to decide how to conduct the business of the meeting.

Kwan & Pun Co Ltd v Chan Lai Yee ([2002] HKEC 1401, CA) concerned an owners’ meeting that had been convened in accordance with section 3(2) of the Building Management Ordinance to consider whether or not to appoint a management committee. The owner of 69.74% of the shares intended to oppose the creation of a management committee. The chairman of the meeting asked the meeting to vote both on the appointment of nine committee members and then on the appointment of the officers of the committee. These appointments were each dealt with individual by individual. Owners were asked to raise their hands if they approved the appointment. Then they were asked whether anyone objected. No-one did and there was an acclamation to the effect that no-one objected. The majority owner did intend to object. His proxy expected there would be a resolution on the question as to whether or not there should be a management committee at all. This was never put to the meeting. The majority owner objected that the resolution to appoint the committee was invalid. Amongst the grounds on which he relied were the failure to consider whether there should be a committee at all and the way in which voting was conducted. The majority owner succeeded at first instance but failed in the Court of Appeal. It was clear that the meeting had been called to consider the question as to whether or not there should be a management committee. The appointment of individual members and office-holders implied that the meeting agreed with the creation of the committee. The majority owner should have objected to the appointments. As to the conduct of the meeting, this is in the hands of those present. If they are content to proceed as this meeting did, if there is no objection, then the resolutions are valid.

Majority of owners can vote as they wish provided there is no oppression of the minority

September 12, 2011

An owners’ meeting can approve works that have already been carried out on the instructions of the manager and agree that all the owners will contribute to the cost. The owners can validly pass such a resolution even though the works have been carried out before the owners’ meeting has considered and approved them (provided there is nothing in the DMC to the contrary). The majority of owners can vote as they see fit in the owners’ meeting provided that what is approved is lawful, within the terms of the DMC and does not amount to an oppression of the minority.

Grande Properties Management Ltd v Sun Wah Manufactory Ltd ([2006] 3 HKLRD 473, CFA) concerned the management of a multi-owned building (the owners had not incorporated). The owners’ meeting approved the carrying out of certain renovation works at the cost of the owners. SW (one of the owners) did not attend the meeting and refused to contribute to the cost of the works. Further works were carried out. These were approved by the owners in 2001 at a meeting after the work had been done.  SW objected on the grounds, inter alia, that the approval was retrospective. The CFA held that the approval was not retrospective (even though the works had been carried out before the meeting) since the obligation arose only once the owners had approved the works. In any event, absent some special provision in the DMC, owners were entitled to give ‘retrospective’ approvals. The fact that the parent company of the manager had become the majority owner of shares in the building between the works and the 2001 meeting was irrelevant.  The majority of owners can vote as they see fit in the owners’ meeting provided that what is approved is lawful, within the terms of the DMC and does not amount to an oppression of the minority.