Can a Condominium Board Remove the Chairperson It Elected? A 2017 Japanese Supreme Court Ruling

Date of Judgment: December 18, 2017
Case Number: 2017 (Ju) No. 84 (Supreme Court, First Petty Bench)

Introduction

The governance of condominium associations in Japan often involves a two-step process for selecting its leadership: unit owners at a general meeting elect a board of directors, and then these elected directors, through a mutual vote amongst themselves, choose a chairperson. This chairperson typically also serves as the "manager" (管理者 - kanrisha) stipulated under Japan's Condominium Ownership Act, wielding significant operational authority. A critical question that has arisen from this common structure is whether the board of directors, having elected the chairperson, also possesses the power to remove that individual from the chairperson position without recourse to a full general meeting of all unit owners.

A landmark decision by the Japanese Supreme Court on December 18, 2017, addressed this very issue, providing crucial clarification on the interpretation of condominium bylaws and the balance of power between the board and the general meeting concerning the leadership of the management association.

Facts of the Case

The case involved X, a unit owner and initially the chairperson of the management association, and Y, the management association of a condominium located in Kurume City, Fukuoka Prefecture ("the Condominium"), which was completed in August 2012.

Relevant Provisions of The Condominium's Bylaws (本件規約 - honken kiyaku):
The Condominium's bylaws, which are central to the dispute, included the following pertinent articles:

• Article 40, Paragraph 1: The management association shall have officers, including a chairperson (理事長 - rijichō), vice-chairperson(s) (as directors), other directors (理事 - riji), and auditors (監事 - kanji).
• Article 40, Paragraph 2: Directors and auditors shall be elected from among the unit members at a general meeting (総会 - sōkai).
• Article 40, Paragraph 3: The chairperson, vice-chairperson(s), etc., shall be elected by mutual vote of the directors (理事の互選により選任する - riji no gosen ni yori sennin suru).
• Article 43, Paragraph 2: The chairperson shall be the "manager" as defined in the Condominium Ownership Act.
• Article 47, Paragraph 4: The chairperson may convene an extraordinary general meeting at any time deemed necessary, after a resolution of the board of directors (理事会 - rijikai).
• Article 49, Paragraph 1: If unit members representing at least one-fifth of the total number of unit members and one-fifth of the total voting rights submit a request specifying the purpose of a meeting, the chairperson must issue a notice convening an extraordinary general meeting within two weeks, for a date within four weeks from the request.
• Article 49, Paragraph 2: If the chairperson fails to issue the notice as per Paragraph 1, the unit members who made the request may themselves convene the extraordinary general meeting.
• Article 53, Item 13: The "appointment and dismissal of officers" (役員の選任及び解任 - yakuin no sennin oyobi kainin) requires a resolution of a general meeting.

Sequence of Events Leading to the Dispute:

1. Initial Elections: After the Condominium's completion in August 2012, an extraordinary general meeting in January 2013 elected 10 officers. In a subsequent board of directors meeting in March 2013, X was elected as the chairperson by the mutual vote of the directors. In August 2013, a regular general meeting elected five additional officers, bringing the total to 15.
2. Disagreement and Chairperson's Action: A significant disagreement arose between Chairperson X and other officers concerning a proposal to change the management company servicing the Condominium. On October 10, 2013, X, acting as chairperson, issued a notice to convene an extraordinary general meeting to discuss this change, but did so without obtaining a prior resolution from the board of directors as stipulated in Article 47, Paragraph 4 of the bylaws.
3. Board Resolution to Remove Chairperson X: In response to X's unilateral action, a board of directors meeting was held on October 20, 2013. Eleven of the other 14 officers (10 directors and 1 auditor) attended. By a unanimous vote of the 10 attending directors, the board passed a resolution ("the Board Resolution") to:
   • Change X's position from chairperson to that of a regular director.
   • Appoint another director, A, as the new chairperson in place of X.
4. Subsequent General Meeting to Dismiss X as a Director: Later, on May 18, 2014, a group of 65 unit members (constituting more than the one-fifth required by Article 49, Paragraph 1) requested both X and the new chairperson A to convene an extraordinary general meeting. The stated purpose of this meeting was, among other things, to dismiss X from his underlying position as a director.
5. X, still asserting his status as chairperson, issued a notice on June 1, 2014, for an extraordinary general meeting to be held on June 13. However, the group of requesting unit members deemed X's convocation notice invalid (arguing it violated notice period requirements in Article 48, Paragraph 1) and, citing Article 49, Paragraph 2 (which allows members to convene if the chairperson fails to do so properly), proceeded to convene their own extraordinary general meeting.
6. This member-convened extraordinary general meeting was held on July 5, 2014, and a resolution was passed to dismiss X from his position as a director ("the General Meeting Resolution").

X's Lawsuit and the High Court's Decision:
X filed a lawsuit against Y (the management association) seeking, among other things, a judicial declaration that both the Board Resolution (removing him as chairperson) and the subsequent General Meeting Resolution (dismissing him as a director) were invalid.

The Fukuoka High Court ruled in favor of X on these key points:

• It found the Board Resolution invalid. The High Court reasoned that Article 40, Paragraph 3 of the bylaws only provided for the election of the chairperson by the directors, not for their removal from that post. It held that removing X from the chairpersonship by a board resolution was not permitted under the bylaws, especially since Article 53, Item 13 stipulated that the "dismissal of officers" was a matter for the general meeting.
• Consequently, it also found the General Meeting Resolution invalid. Since the Board Resolution was deemed invalid, X legally remained the chairperson. According to the High Court, X had validly convened his own extraordinary general meeting (for June 13). Therefore, the conditions for unit members to convene their own meeting under Article 49, Paragraph 2 (i.e., the chairperson's failure to convene) had not been met, rendering the convocation procedure for the July 5 meeting fatally flawed.

The management association, Y, appealed the High Court's decision to the Supreme Court.

The Supreme Court's Judgment

The Supreme Court, on December 18, 2017, overturned the High Court's judgment concerning X's main claims and remanded the case for further proceedings. The Supreme Court's core reasoning focused on the interpretation of the bylaws regarding the chairperson's position and removal.

1. Interpreting the Bylaws – The "Rational Intent" of Unit Owners:
The Supreme Court began by noting that the Condominium Ownership Act (Article 25, Paragraph 1) allows the method for appointing and dismissing the "manager" (a role the chairperson fulfills under Article 43, Paragraph 2 of these bylaws) to be determined by the condominium's bylaws. This establishes the primacy of the bylaws as an autonomous set of rules established by the unit owners.

The Court then analyzed the specific structure set up by The Condominium's bylaws:

• Directors are elected by the general meeting of all unit members (Article 40, Paragraph 2). These individuals are thus "officers" whose ultimate appointment and dismissal as officers is subject to a general meeting resolution (Article 53, Item 13).
• The chairperson, however, is chosen from among these already-elected directors by a mutual vote of the directors themselves (Article 40, Paragraph 3).

The Supreme Court interpreted this structure as positioning the role of "chairperson" as one of the specific posts or assignments that a director (already an "officer" by virtue of GM election) could hold. By stipulating that the directors select the chairperson from amongst themselves, the bylaws are effectively entrusting the body of GM-elected directors with the decision of who among them is best suited to carry out the duties of the chairperson.

2. Implied Power of the Board to Remove from the Chairperson Post:
Crucially, the Supreme Court reasoned that this delegation of power to the directors to select the chairperson by mutual vote also logically implies the power for a majority of those same directors to de-select an individual from that specific chairperson role and to choose another director to fill that role. This interpretation, the Court stated, aligns with the "rational intent" (合理的意思 - gōriteki ishi) of the unit owners who formulated and adopted the bylaws.

3. "Dismissal of an Officer" Distinguished from "Removal from the Post of Chairperson":
The Supreme Court addressed the apparent conflict with Article 53, Item 13 (requiring a GM resolution for "dismissal of officers"). It clarified that this provision refers to the removal of an individual from their fundamental status as an officer – that is, dismissal as a director or as an auditor. It does not prevent the board of directors from internally deciding which of its members, all of whom remain directors (and thus officers), will hold the specific leadership post of chairperson. The board's action in changing X's role from chairperson to a regular director, while appointing another director A as chairperson, was a change in assignment within the board, not a dismissal of X as a director/officer.

4. Validity of the Board Resolution:
Based on this interpretation, the Supreme Court concluded that in a management association with bylaws structured like those of The Condominium, it is indeed permissible for a majority of the directors to remove a chairperson (who had been selected by their mutual vote) from the post of chairperson, pursuant to the same bylaw provision (Article 40, Paragraph 3) that empowers them to elect the chairperson.

Therefore, the Board Resolution of October 20, 2013 – where 10 attending directors unanimously voted to relieve X of his duties as chairperson and designate him as a regular director – was not, in its substance, a violation of The Condominium's bylaws.

5. Consequences for Subsequent Resolutions and Remand:
Since the Board Resolution validly removed X from the chairpersonship as of October 20, 2013, the High Court's primary reason for invalidating the subsequent General Meeting Resolution (which was predicated on X still being the legitimate chairperson who had supposedly called his own valid meeting) was no longer tenable.

The Supreme Court therefore quashed the High Court's decision regarding X's claims and remanded the case back to the Fukuoka High Court. The remand was for the High Court to conduct further examination of other arguments X had raised, such as alleged procedural flaws in the convening of the October 20, 2013 board meeting (an issue the High Court had not fully addressed in its initial ruling because it found the resolution substantively invalid). The validity of the General Meeting Resolution would then need to be reassessed based on a correct understanding of X's status after the Board Resolution.

Analysis and Broader Implications

The Supreme Court's 2017 decision has had significant reverberations in the field of Japanese condominium management.

1. Impact on Condominiums Using Standard Management Rules:
The bylaws of The Condominium were based on a version of the "Standard Management Rules" (マンション標準管理規約 - manshon hyōjun kanri kiyaku) issued by the government, which serve as a template for a vast majority of condominiums in Japan. Before a March 2016 revision, these Standard Rules had similar provisions for the election of the chairperson by directors and the dismissal of officers by a general meeting. Thus, the Supreme Court's interpretative approach had immediate relevance for a large number of management associations.

2. Promoting Functional Board Governance:
The decision is seen as promoting more functional and responsive governance within condominium boards. Conflicts between a chairperson and the majority of the board members are not uncommon. If a board lacks the ability to change its internal leadership (the chairperson) when it loses confidence in that individual, the management of the association can become deadlocked or severely hampered. The Supreme Court's interpretation allows the board, which is entrusted with day-to-day management decisions, to ensure its leadership reflects the board's collective will.

3. Distinguishing from Dismissal as a Director:
A key takeaway is the careful distinction between removing someone from the post of chairperson and dismissing them from their underlying role as a director. The former, if the chairperson was board-elected, can be done by the board. The latter, being a dismissal of an "officer," generally requires a resolution of the general meeting of all unit owners. This maintains the ultimate authority of the unit owners over who serves as their elected directors.

4. Subsequent Revision of Standard Management Rules (2021):
This Supreme Court judgment directly spurred a clarification in the official Standard Management Rules. In a revision issued in June 2021, the relevant article (now Article 35, Paragraph 3 of the standard single-building type rules) was amended to explicitly state that the chairperson, vice-chairperson(s), and treasurer are not only elected by a resolution of the board of directors from among the directors but can also be dismissed from those specific posts by a board resolution. This amendment effectively codified the Supreme Court's interpretative stance into the model bylaws, providing much-needed clarity for condominium associations.

5. Broader Considerations for Condominium Governance:
While the immediate issue was the removal of a chairperson, the case touches upon more fundamental questions about the appropriate division of powers and responsibilities between the general meeting (the ultimate authority representing all unit owners) and the board of directors (the executive body responsible for ongoing management). Ensuring that condominium management is efficient, responsive, and truly reflects the collective will of the unit owners requires ongoing attention to these governance structures. This Supreme Court decision, and the subsequent bylaw clarifications, contribute to this evolving understanding.

Conclusion

The Supreme Court's 2017 ruling provided a significant clarification regarding the internal governance of Japanese condominium management associations. By focusing on the rational intent behind bylaw provisions that allow directors to mutually elect their chairperson, the Court affirmed the board's implied power to also remove an individual from that specific leadership post, provided the person retains their underlying status as a director (unless separately dismissed as a director by a general meeting). This decision prioritizes a functional approach, enabling a board of directors to ensure its leadership aligns with its collective will, a principle that has now been explicitly reflected in the updated Standard Management Rules, thereby promoting clearer and more effective condominium governance across Japan.