Democracy in Building Management

BASICS OF DEMOCRACY

The United Nations describes that democracy provides an environment for the protection and effective realization of human rights, and these values are embodied in the Universal Declaration of Human Rights. But there is no legal definition. The very essence of democracy lies in the fact that it is a system of governance that derives its legitimacy from common people. The term ‘democracy’ traces its origin back to the Greek philosophical era where ‘demos’ referred to ‘the many’, the idea emerging as a response to the notion of aristocracy - rule of the elite, or a selected few. Quite possibly one of the most debated ideas not just in the realm of political theory but also everyday society, the concept refers to a system where common people elect their representatives to form a government that works to protect the interests of the people, functioning on the basis of principles such as equality and liberty - deriving authority from the consent of people themselves. Popular consent is at the core of democracy. A democratic system emerges out of the belief that each member of the political community is allowed to have a say in the decision-making process that governs their lives and each one person is as important as the next.

BUILDING MANAGEMENT

For the Hong Kong people, their own residences are usually their most valuable assets for which most of them work almost their entire lives to pay for the upfront deposits and mortgages installments. The owners are responsible for the maintenance of these private properties. The Home Affairs Department of the Government oversees and offers support to facilitate the implementation of the Building Management Ordinance (Cap. 344) (“the Ordinance”) which is the primary legislation governing and regulating the management and maintenance of these properties. It sets out the powers and duties of an owner’s corporation, of which all owners are its members, and its meeting procedures so as to facilitate the day-to-day operation of the corporation and compliance by the owners. It is the initiative and policy of the Government to encourage active participation of owners and residents in building management as this is in their own interests.

In the operation of building management where residents elect the management committee members who in turn manage the buildings in which their properties are situate, albeit amounting to a meagre ration of legal practice, one can relate and compare this with the ideal democratic process sought after in the wider society in which citizens elect their representatives into the government who are given the mandate to rule. A building managed under the Ordinance can be said to be a miniature of the society at large.

MAJOR PRINCIPLES OF DEMOCRACY

  • The principle of political equality is a core principle that democracy draws its strength from. In a democracy, every member of the society is believed to have equal political power. However, despite the intent of democracy being a system where everyone can participate - in actual practice, there is not a consensus who really these ‘people’ are. History shows that political participation even in a democratic system has not allowed to every section of the society. In the direct participatory democracy that was practiced in the Greek city states, women, slaves and foreigners were not allowed to vote - the participation extended to only male Greek citizens over 20 years of age. Such an exclusionary practice continued well into the 20th century, where universal suffrage was not established in the United Kingdom, the United States of America and Switzerland until 1928, early 1960s and 1971 respectively. The modern society essentially views the idea of democracy to be an application of the ‘the rule of majority’ (Heywood, 2013). In the building management scenario, as required under paragraph 3(3) of schedule 3 of the Ordinance, all matters arising at a general meeting are decided by the votes of the owners. Note that decisions, including one to appoint management committee members, are exercisable by residents by virtue of their share of ownership of and in the building. Residents and occupants who are tenants or licensees are not entitled to vote, unless under proxy given by the owners. Section 15 providing for the appointment of a tenants’ representative attempted to fill the void, but this provision is rarely used and is also subject to the approval by the owners. Equality of participation is demarcated in the system in which each owner has one vote in respect of each share he owns in the building.
  • Rule of law is another core principle of democracy. In a democratic system, it is the codified law that governs the society, not a single individual as opposed to the Monarchy. In a democracy, every citizen is subject to equal legal rights and bound by similar fundamental legal duties, including the elected representatives of the government as well as the law-makers in the society. In a democracy, the rule of law is aimed at preventing discrimination against the members of society on the basis of their race, gender, class or religion (Ibid). Under s. 14(1) of the Building Management Ordinance, the owners’ corporation may decide on the control, management, administration, renovation, improvement or decoration of the common parts of the building, and these decisions are binding on all the owners alike. Under s. 29, the powers and duties conferred or imposed by the Ordinance are exercisable on behalf of the owners’ corporation by the management committee. The handling by the management committee on day-to-day business of the owner’s corporation is necessary as many of these matters need prompt and effective attendance. Effectively, the management committee makes decision which is binding on all the owners without exception, preference or discrimination. This corresponds to the rule of law doctrine in which no one, including those who make or impose laws, is above the law.
  • Another fundamental principle in a democratic system is that of political representation as applied through the practice of fair elections. Every citizen of a democratic system is allowed to participate in the elections aimed at choosing representatives of the people from every section of the society that eventually form the government. The government is accountable to the people for their actions as it is the consent of the people that legitimizes their authority in the first place (Dahl & Shapiro, 2015). In building management, detailed provisions on election of the management committee are set out in the Ordinance, including those providing for the number of management committee members (para 1(2) of sch 2), adoption of “first-past-the-post” system (para 2(3)&(4) of sch 2),  eligibility for appointment (para 4(1) of sch 2), appointment of chairman, secretary and treasurer (para 2(1)(c)&(d) of sch 2),  filing of statement of eligibility (paras 4(3)&(6)(a) of sch 2), and filling of temporary vacancies (para 6 of Sch 2). Elaborate rules are necessary as many of the residents are not educated in law and would not understand how their own rules can be designed and in compliance to which they submit themselves. These mandatory regulations in the Ordinance aim to ensure elections are held consistently in procedure and fairly in substance.

Election of representatives can be subject to judicial challenge as was in the case of Kwan & Pun Company Limited v. Chan Lai Yee and others (CACV 234 / 2002 on appeal from LDBM 542 / 2001) on, inter alia, alleged procedural regularities in the manner of voting by hand-raising. No one in the meeting objected to this manner of voting at the meeting. This point was dismissed whilst the Court of Appeal adopted the following principle :-

“…there are many matters relating to the conduct of a meeting which lie entirely in the hands of those persons who are present and constitute the meeting. If necessary, a vote must be taken to ascertain the wishes of the majority. But if no objection is taken by any constituent of the meeting, the meeting must be taken to be assenting to the course adopted: Carruth v. ICI [1937] AC 707 at 761.”

Eligibility to run an election was a critical issue in the case of Wong Kam Tong v. The Incorporated Owners of Yuen Long Tin Shing Court ([2012] 2 HKLRD 1128). One of the questions posed was whether the management committee or returning officer (appointed by the owners’ corporation) could disqualify an owner from running in the election. The Lands Tribunal expressed the view that anyone who is an owner is eligible to run in the election and to be appointed as a member of a management committee. Hence, the management committee or returning officer could not disqualify his eligibility. In the venue of seeking leave to appeal, the High Court was of the view that whether the Management Committee or the returning officer could made any decision to disqualify an owner from running in an election is arguable but not appealable in the present case as it was only one part of the trial judge’s analysis and conclusion, not a determination of the Lands Tribunal which was sought to be appealed against.

The viability by way of judicial challenge and jurisdiction of the Courts over the procedures in which management committees are elected guard against unfair practices at elections.

  • The principle of liberty is essential to the idea of democracy. A democratic political system allows its subject the freedom of thought and expression, the freedom of movement, and the freedom of belief. Democracy allows the space for diversity in a society where people of any religion, gender, race or class are allowed the liberty to lead a life according to their beliefs as long as in doing so, they do not encroach upon the liberty bestowed on others (Ibid). The Home Affairs Department, the executive arm representing the Authority of the Building Management Ordinance, supports and aids the owners to better manage their buildings. In this premise, government staff visit owners to promote good practices in building management, attend meetings of owners, and advise on relevant procedures. It is not the responsibility on the part of the Department or its policy to do the management work for the owners. On the contrary, it encourages the owners and residents to participate actively in the management of their buildings. Policies of encouragement includes exemption of fees on obtaining owners’ records, referral to free legal advice service, and provision of various booklets of guidance for ease of understanding of the formation and operation of owners’ corporations. Much leeway and freedom is left with the owners and the committee members to decide how their buildings are to be managed and governed, in any case within the constraints of the law.
  • A democratic system is designed to protect the rights of people. The government cannot act arbitrarily and take away the fundamental rights of its citizens. Separate from the notion of human rights, the idea of citizenship is one where the subjects exercise certain freedoms by the virtue of being members of respective political communities - such rights protected by the law that the government cannot exploit. In turn, the law also asks the citizens to perform certain duties as members of the society that they are ethically obligated to uphold. The protection of citizen’s rights are dependent upon the fulfilment of their duties (Heywood, 2013). The primary purpose for which the Building Management Ordinance was enacted was to facilitate the formation of owners’ corporation and hence effective building management. The powers and duties of an owners’ corporation and its meeting procedures facilitating the day-to-day operation of the owners’ corporation and compliance by owners are set out front and centre in the Ordinance. Under sub-section 18(1), the owners’ corporation shall properly manage and maintain the common parts of the building, and do all things reasonably necessary for the enforcement of the relevant obligations for the control, management and administration of the building. Under sub-section 18(2), the corporation may also decide on matters related to the common parts of the building, e.g. provision of facilities or renovation, improvement or decoration work. The coming about and design of the Ordinance and the very establishment of owners’ corporations thereunder are to protect the interests of and improve the livelihood of the owners by way of better managing their valuable properties in which they reside. The residents, in turn, have to comply with the decisions made by the management committee in accordance with the procedures laid down in the Ordinance and to fulfill their duties as responsible co-owners within the neighbourhood.

DEMOCRACY AS DEMONSTRATED IN BUILDING MANAGEMENT

While the earliest forms of democracy as practiced in the city states of Greece as well as the Roman republic were direct in nature - the limited section of citizens that were allowed to participate cast their vote directly in the elections, the sheer number of subjects in modern states do not allow such a scope any longer. Today the form of democracy most commonly witnessed is that of electoral democracy, or representative democracy - representatives are elected on the behalf of people. Likewise, under s. 29 of the Ordinance, the powers and duties conferred or imposed by the Ordinance are exercised and performed by the management committee on behalf of the owners. While there are debates regarding whether or not democracy is indeed the best form of government that we can follow, there are certain undeniable benefits that are there to following a democratic system.

Democracy is designed to protect and promote equality, both political and legal. In a democratic system, not only every member of the political community is an equal stakeholder in the society - but they also enjoy equal legal security, everyone is equal in the eyes of the law. Every democratic institution is founded on the basis of equality and strives not to allow any discrimination based on any social cleavages. Democracy also protects the citizens’ rights. Democratic laws prevent the government from usurping what rightfully belongs to the public, and there are even fundamental mandates in place that the government is bound to oblige as it is the common people whose elected representatives form the government in the first place.

In a democracy, the government is accountable to the common people. Under paragraph 1(1) of schedule 3 of the Building Management Ordinance, the management committee must convene the first annual general meeting of the owners’ corporation not later than 15 months after registration of the owners’ corporation, and must convene an annual general meeting within 12 to 15 months after the previous annual general meeting thereafter. In a democratic society as well as in building management practice, there are measures of checks and balances in place to ensure the prevention of abuse of authority. Under paragraph 1(2) of schedule 3 of the Ordinance, the chairman must convene a general meeting at the request of not less than 5% of the owners for the purposes specified by such owners within 14 days of receiving such request, and hold the general meeting within 45 days of receiving such request. The chairman does not have a discretion to convene a meeting at some time more 14 days after receipt of the request – but an obligation to convene a meeting within the specified time (see 胡桂容及另一人 黃漢明 - LDBM 323 / 2002). Under s. 30, if the owners are dissatisfied with the performance of the management committee, they may appoint an administrator and thereafter dissolve the management committee by a resolution passed at a general meeting. Under s. 31, they may also make an application to the Lands Tribunal for an order to dissolve the management committee and appoint an administrator. These provisions for elections on a regular basis and upon reasonable request ensure that the management committee does not act arbitrarily and is accountable to all the owners equally.

In modern representative democracies, elections take place periodically, ensuring not only equal chances to every citizen to practice their right to participate in the political system but also that the authority to govern comes and stays with the office that representatives are elected to, not the representatives themselves. Under paragraph 5(1)&(2) of schedule 2 of the Building Management Ordinance, all the management committee members (except the tenants’ representative) including the secretary and treasurer must retire from office at the second annual general meeting and every alternate annual general meeting thereafter at which new members are appointed. But note that under paragraph 3 of schedule 2, the members of the management committee are to hold office until members of a new management committee are appointed. This implies that where the existing management committee does not convene an annual general meeting on time for the purpose of appointment of new management committee members, their tenure continues in the interim nevertheless. Under paragraph 5A of schedule 2, a management committee member who retires from office shall within 14 days of his retirement hand over to the secretary relevant items in his custody in respect of the control, management and administration of the building. In 榮福中心業主立案法團vs卓劍強 (LDBM 340 / 2012), it was determined that paragraph 5A did not give the retiring committee member a discretion to consider whether to comply with that paragraph, and the court ordered the committee member to hand over the corporation chop. The authority stays with the office and not any individual committee member.

The principle of popular representation, at least in theory, allows the entire political community to participate in the system that they are subjects to. While there are still some restrictions to voting, the principle of universal adult suffrage is followed all over the world - a far cry from the Monarchical systems where Kings ruled by divine authority and answered to only God, effectively paving way for unrestricted authority where the common people had no voice. Many argue that universal suffrage should encompass the right to run for election as well as the right to vote. In a building management scenario, the trial judge in the case of Wong Kam Tong v. The Incorporated Owners of Yuen Long Tin Shing Court (above) expressed the view that eligibility to run for the office of a management committee member exists by virtue of the candidate being an owner. In any case, there was no dispute that the codes on candidacy and home visits made by the management committee were reasonable; no arbitrary rule was imposed which was designed to favour or disapprove of any particular person.

In owners’ participation in building management, many cases concern with disputes on allegations of procedural irregularities and disputes between the existing management committee (mostly its chairman) and some of the owners who have organized among themselves a new management committee to replace the existing one. In 余劍英 張文東及另三人 ([2005] 4 HKLRD 762), the chairman of the meeting announced adjournment of the meeting due to lateness of the night but was objected to. Those who remained continued with the meeting and passed certain resolutions for the appointment of new management committee. Dispute arose as regards whether the adjournment was valid and whether those resolutions passed were effective. It was determined that the right to adjourn a meeting does not solely rest with the chairman. If necessary, this should be put to the vote. However, if no one objected in the meeting, it could be seen as the general meeting had decided to adjourn the meeting. In 何英生及另九人 vs 王竹筠及另七人 (LDBM 152 / 2012), the chairman announced adjournment of the meeting due to change of weather affecting the venue. The adjournment was objected to by some and those remaining continued with the meeting and passed certain resolutions including those for the appointment of the new management committee. Similarly, dispute arose. Given the sudden change of weather, thunderstorm, rainstorm, flood warning, the ensuing chaos at the scene, and that attendees were starting to leave -- it was not feasible to put the matter to the vote. It was determined by the court that the adjournment was reasonable and affirmed. Last but not the least, the scope of political participation in a democracy should allow the citizens the opportunity to nurture and educate themselves as responsible members of the political community whose duty is to ensure an efficient, accountable and representative system of governance (Arblaster, 2002). The participation in running for committees in building management, the handling of the incidental disputes and their resolutions, and paying for the legal costs expanded thereon, have no doubt been lessons the residents have learnt much from.

SHORTCOMINGS OF DEMOCRACY IN BUILDING MANAGEMENT

Despite democracy being the most popular choice for a governmental system, it is not considered to be the best of choices. The first criticism that democracy has been subject to is that it creates an inefficient government. In余劍英 張文東及另三人 (above) and 何英生及另九人 vs 王竹筠及另七人 (above), building management disputes arising between existing/past management committee and the new/intending management committee must necessarily have brought administration to a halt or much obstruction and inconvenience due to competing and mutually exclusive claims to authority. Philosophers like Plato have argued that governance is a matter of expertise and those in charge of governance should prove their capabilities. However, democracy is said to have a false understanding of human nature whereby it is assumed that every member of the political community is equally competent to deal with various complex issues of governance.

Secondly, the principle of popular representation often implies that it is only the interest of majority that is protected and upheld in a democracy. The minorities in a democratic society are often under-represented and their rights hindered as it does not align with the prevailing majority interest. Greek philosopher Aristotle, in his famous classification of governments, referred to democracy as a corrupted form of governance where the masses protect their own interests over the common interest for all. Tocqueville echoed his arguments along the same lines and came up with the phrase 'tyranny of the majority' which referred to a danger against minorities. In 金百利商場案 (CACV186/2003 & CACV400/2013), the owner of the commercial arcade has 77.09% of the shares of ownership to the building. The relevant construction work on common areas and favouring that owner was resolved and authorized by way of 4 written resolutions. According to clause 27(l) of the Deed of Mutual Covenants of the building,“any resolution in writing signed by owners who in the aggregate have vested in them for the time being more than 75% of the shares in the Land and the Development allocated to the Commercial Development shall be as valid and effectual as if it had been passed at a duly convened meeting of the owners” and hence the written resolutions were binding on all owners. The Court of Appeal determined that it was due to the practical operational needs that the Ordinance adopts the basis of resolutions by way of majority vote, but requires the relevant resolutions to be decided in a meeting. The Ordinance places emphasis on resolutions arrived at as a result of discussions and putting the issue to the vote in meetings. The court observed this from the fact that there are no regulations providing for resolutions to be made in writing in the Ordinance. It could still be argued that the owner of the commercial arcade could have proposed the resolutions in a physically convened meeting and forcefully passed the resolutions validly nevertheless.

Elite theorists such as Mosca and Pareto issue warnings against the inevitable concentration of powers in the hands of a select few - the elites of a society possess certain psychological skills that can convince the masses that the elites are better fit to form a government. Keeping the scholarly critiques aside, one cannot ignore the fact that in modern day democracies, elections are an expansive affair and requires an immense amount of resources. The presence of lobby groups also influences the decision-making process in representative democracies, leaving certain sections in the society vulnerable (Held, 2013).

However, even with all its benefits and criticisms - it remains to be said that the fundamental principles underlying the idea of democracy makes it a desirable practice and one possibly suited for the modern Westphalian states. Democracy advocates equality and decentralization of power, both principles crucial in order to not only maintain a just society that practices fair distribution of resources but also to strengthen collective unity. It is with participation in building management where residents can practice democracy on their own determining issues which matter to them closest to home, and by learning through trial and error, realize that democracy comes with benefits as well as deficiencies.

 

REFERENCES

Heywood, A. (2013). Politics (4th ed., pp. 89-99). NYC: Palgrave Macmillan.

Dahl, R., & Shapiro, I. (2015). On democracy. New Haven (Conn.): Yale University Press.

Arblaster, A. (2002). Democracy. Philadelphia, PA: Open University Press.

Held, D. (2013). Democracy and the Global Order. Oxford: Wiley.

Mr. Choi holds a Master of Laws from London, a Master’s degree in Urban Planning of Heriot-Watt University, and is a Licentiate of the Royal Town Planning Institute. Formerly the Commercial Partner of a Hong Kong law firm, In-house Counsel of an Asset Management firm and a Sharing Economy IT platform, he has engaged in legal practice for almost two decades. Whilst offering service on the Appeal Panel at the Housing Authority, the Disciplinary Panel of Social Workers Registration Board, and the Market Misconduct Tribunal, he is presently undertaking further graduate legal research with Oxford University.