TANG TAK SUM AND ANOTHER v. TANG KAI FONG

HCA 2089/2009

[2020] HKCFI 349

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2089 OF 2009

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JUDGMENT

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A.Introduction

1.  On 28 November 2014, the Court of Appeal ordered (“CA Order”):

“There be Judgment for the 1^st and 2^nd Plaintiffs for an account and inquiry of the income and expenditure received and incurred by the Defendant of the Land and payment to the 1^st and 2^nd Plaintiffs of money (if any) due to them in respect of their share of the Land after taking the account and inquiry.”

2.  The Court of Appeal’s Judgment is reported as Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286 (“CA Judgment”).  I shall adopt the abbreviations and nomenclature used in the CA Judgment. 

3.  This is the hearing for an account and inquiry as directed by the Court of Appeal.  D gave 6 affirmations and viva voce evidence in Court.  Ps filed two notices of objections to D’s accounts.  I also received and considered submissions from Mr KM Chong and Mr Aidan Tam (acting for Ps) and from Ms Candy Chan (acting for D). 

4.  The difference in principle between the parties, which I need to resolve first before moving on to deal with the actual account and inquiry, is Ps’ claim, which D disputes, that the account for rent should be calculated not on the basis of rent actually received by D but based on market rent of the Land regardless of whether D had actually rented out the Land and the rent he received.  More specifically, the bases of Ps’ claim are first, D’s alleged wilful default and second, that D ought to pay occupation rent^[1] for his sole occupation of the Land. 

5.  In my view, this dispute is primarily resolved by reference to the terms of the CA Order read in the context of the CA Judgment, to which I presently turn to. 

B.     CA Judgment

6.  Ps and D are tenants in common of the Land (i.e. a piece of land in the New Territories known as Lot 581 in Demarcation District 130).  Ps hold ¼ share in the Land whereas D holds the remaining ¾ share: CA Judgment §1. 

7.  The Land had been let out by D as a car park which was against its authorized use.  D has been collecting the rent of the Land without accounting to Ps: CA Judgment §2. 

8.  Ps’ claim against D for an account of the income and expenditure of the Land was put on two bases: they said D was liable to account qua trustee to beneficiaries or alternatively qua co-owner of the Lot appointed as bailiff of other co-owners: CA Judgment §42.  

9.  Both the trial Judge and the Court of Appeal rejected the first basis for the reason that Ps had failed to establish the alleged ancestral worship trust such that D had no duty qua trustee to render an account of income and expenditure in respect of the Land: CA Judgment §§43-45. 

10.  On the other hand, the Court of Appeal, differing from the trial Judge, held that the authority of D’s father and subsequently of D to collect rent from the Land came from the Division of Family – whereby the clear wording provided that D’s father was assigned to collect rent from the Land – and therefore D must account qua bailiff of other co-owners of the Land: CA Judgment §§7-9, 11, 45, 49. 

11.  In this regard, Ps’ contention^[2] that the Court of Appeal “did not make any finding as to the basis (agent or bailiff) upon which the account should be rendered.” is plainly wrong. 

12.  The Court of Appeal allowed Ps’ appeal and set aside the judgment below.  More specifically, it held at CA Judgment §51:

“...Further there will be judgment for the plaintiffs for an account and inquiry of the income and expenditure received and incurred by the defendant of the Land and payment to the plaintiffs of money (if any) due to them in respect of their share of the Land after taking the account and inquiry.”

C.     Wilful default

13.  I reject Ps’ claim that D is liable to account for the market rent of the Land on the basis of wilful default. 

14.  As shown above, the CA Order (and CA Judgment §51) specifically provided that there should be an account and inquiry for the income received by D of the Land.  In my view, what is being directed is an account and inquiry in common form as opposed to an account and inquiry on the footing of wilful default.  Nor did the CA Order make any provision that Ps may later apply for the account to be taken on the latter basis.  Ps did not appeal against the CA Order.  Accordingly, it seems to me the CA Order precluded Ps’ claim for an account on the basis of wilful default. 

15.  Even supposing I were wrong, I would reject P’s present claim for an account on the basis of wilful default for the following reasons. 

16.  The leading texts on the subject are clear that a plaintiff who wishes to obtain an account on the footing of wilful default must specifically plead and prove the alleged wilful default: Snell’s Equity (34^th Ed), §20-026^[3]; Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5^th Ed), §26-095^[4]; Lewin on Trusts (19^th Ed), §§39-048 & 39-050^[5]. The two passages from Lewin are particularly illuminating:

“Sometimes, though, trustees are guilty of breaches consisting of omission, failing to do what they ought to have done. If some such breach is pleaded, and proved at trial, or at least a case for further inquiry established, then the trustees may be ordered to account on the footing of wilful default. In such an account the trustees are charged, not only with what they have actually received, but also surcharged with what they might have received apart from their wilful default or neglect...

If the particulars of claim allege wilful default, the court can order an account on that footing at any stage of the proceedings.  Nonetheless, the claimant must be ready with the requisite degree of proof at the trial, and if at the original hearing the common accounts only are directed it is then too late to ask for relief against omissions of wilful default that transpire incidentally in the course of other inquiries.  Even so, an order has been made at trial on the footing of wilful default for part of an estate and a common account for the rest, but with liberty to apply for further accounts and inquiries on the footing of wilful default on evidence of further default being produced.”

17.  Ps did not plead a case of wilful default against D nor prayed for an account on that footing. Therefore, the Court of Appeal, in allowing Ps’ appeal, only granted an account and inquiry in common form.  Further, the CA Order did not make any provision that Ps may later apply for the account to be taken on the basis of wilful default.  Accordingly, Ps cannot now claim an account on the basis of wilful default, which was neither pleaded nor proved.  

18.  But even leaving that aside, the alleged wilful default by D that Ps presently rely on at the hearing before me (i.e. that D had knowingly and blatantly failed to render any account for over 30 years)^[6] would not be sufficient to ground a claim for an account on the footing of wilful default. 

19.  Wilful default in the context under discussion refers to a default whereby an accounting party, in breach of duty, failed to obtain a benefit, which should have been obtained, for the fund: Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 at §170 (Lord Millett NPJ); Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1 at §347 (Edelman J). 

20.  Therefore, a default in rendering an account per se is inadequate to ground a claim for an account on the basis of wilful default: Snell’s at §20-026 citing Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 at §66 (Giles JA). 

21.  The three authorities that Mr Chong refers me to do not assist.

21.1   In Lee Ming Yueh v Broadway-Nassau Investments Ltd [2012] 5 HKLRD 208, the Court of Appeal discussed the meaning of the term “wilful default” in the context of deciding whether a management company and the incorporated owners of a residential estate were in breach of the Deed of Mutual Covenant and section 18 of the Building Management Ordinance (Cap 344). 

21.2   In Re Young and Harston’s Contract (1885) 31 Ch D 168, the Court was concerned with the same term in the context of conditions of sale and in particular whether the vendor has been in wilful default.

21.3   Malhotra v Dhawan [1997] 8 Med LR was concerned with the application of the principle of omnia praesumuntur contra spoliatorem (i.e. all things are presumed against the wrongdoer) where evidence relevant to the taking of an account had been destroyed.  This was not a case about whether to order an account on the footing of wilful default. 

22.  That said, I should say at once that it does not follow that the present account and inquiry is in common form that the principle of omnia praesumuntur contra spoliatorem, relied on by Mr Chong to criticize what he perceived to be inadequacies in D’s accounts, must have no application in this case.  I shall return to this issue below. 

23.  I should also say I do not agree with Ms Chan’s contention^[7] that a tenant in common as bailiff (such as D) is only liable to account for rents actually received but not rent which would have been received but for the bailiff’s wilful default.  Wheeler v Horne (1851) Willes 208, which she cites, actually contradicts her contention.  At page 210, Willes CJ held:

“...a bailiff at common law is answerable not only for his actual receipt but for what he might have made of the lands without his wilful default, as is expressly held in Co. Lit. 172a, and in many other books: but by the plain words of the statute a tenant in common, when sued as bailiff, is answerable only for so much as he has actually received more than his just share and proportion.”^[8]

D.     Occupation rent

24.  I also reject Ps’ claim for occupation rent. 

25.  In the first place, the CA Order did not direct that D should account to Ps for occupation rent for his occupation or use of the Land.  Ps did not appeal and are thus bound by the CA Order. 

26.  Second, I reject the various bases put forth by Mr Chong to ground Ps’ claim for occupation rent. In particular, for reasons discussed below, I consider that none of the authorities that Mr Chong cites to me are applicable to the present case. 

27.  More specifically, the Court of Appeal held that there was no ouster: CA Judgment §39.^[9]  Therefore, Biviano v Natoli (1998) 43 NSWLR 695 and Kong Colin Chung Ping v Kong Wing On (CACV 69/2015, 11 November 2015) are readily distinguishable as occupation rent was payable in those two cases as there had been ouster of the other tenants in common. 

28.  In respect of Forgeard v Shanahan (1994) 35 NSWLR 206^[10], at pages 297 (line 10) to 298 (line 45), Meagher JA (with whom Mahoney JA agreed) held that in equity, an occupation rent may be extracted in at least two scenarios: first, in partition suit or related litigation where there has been exclusion; and second, in partition, administration or statutory sale cases where the owner in occupation who claims an allowance in respect of improvements effected by him will only be permitted to do so if he is accountable for an occupation rent.  Neither scenarios apply to our present case. 

29.  I also consider Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52 to be inapplicable.  In that case, the incorporated owners counterclaimed against the developer (who retained an undisposed interest in the building) for marking out an area designated as common area for its own enjoyment in breach of the deed of mutual covenant that no one should convert common areas for their own use or interfere with common areas.  Godfrey Lam J held that there was liability to pay occupation rent or an equivalent sum in damages.  More specifically: 

29.1   His Lordship first noted that in the absence of ouster (and there was none in that case), “the liability of a co-owner to pay an occupation rent for his occupation of the land is less clear.  The basic rule is that one co-owner is not normally obliged to pay another co-owner rent by reason merely of the fact that the former has been in sole occupation of the property”: §§212-213 of the judgment.

29.2   Reference was then made to In re Pavlou [1993] 1 WLR 1046 for the proposition that the court of equity will order occupation rent not only in the case of ouster but in any other case in which it is necessary in order to do equity between the parties.  That said, his Lordship noted that this proposition is confined to partition or analogous proceedings.  Forgeard and Chen Yu Tsui, which I have mentioned above, were also cited.  See §§213-214 of the judgment.

29.3   His Lordship concluded that there was liability to pay occupation rent because the breach of covenant was “so analogous to the situation recognised in the old cases, where one owner became by agreement the bailiff for his co-owner and liable for an occupation rent...that equity will order an inquiry and payment of occupation rent”: §§215 of the judgment. 

30.  For clarity of exposition, it is necessary to look more closely at the two “old cases” that his Lordship referred to.  In M’Mahon v Burchell (1846) 2 Ph 127, 41 ER 889, an executor was sued for payment of a legacy and in answer, the executor alleged that the plaintiff had for several years occupied a house, that was part of an estate of which the executor and others were tenants in common, and the rent due from the plaintiff in respect of the occupation exceeded the amount of the legacy.  The question was whether Vice Chancellor Wigram was correct in directing the Master to inquire, inter alia, whether the plaintiff was in occupation as pleaded and, if so, whether he ought to be charged with occupation rent, and, if so, the sum chargeable.  Lord Cottenham LC answered the questions in the negative.  For present purposes, I need only state two of the reasons given: first, the executor’s pleaded case that the plaintiff’s occupation of itself made him liable to his co-tenants for rent was unsustainable as a matter of law^[11]; and second, the executor’s argument that there was an agreement that the plaintiff would pay rent to his co-tenants for his occupation was unsupported by the evidence. 

31.  In Henderson v Eason (1851) 17 QB 701, 117 ER 1451, Robert and Edward were co-tenants of certain farmlands, which were occupied and worked by Edward during his lifetime.  After Edward’s demise, Robert, relying on the Administration of Justice Act 1705 (4 & 5 Anne c 16), sued Edward’s executor for an account for the rent and profit received by Edward that were more than his just share and proportion.  Parke B held that on the evidence Edward did not receive more than his just share within the meaning of the Act.  Relevant for present purposes, the learned Judge held (at page 720 of the former report) that:

“There are obviously many cases in which a tenant in common may occupy and enjoy the land or other subject of tenancy in common solely, and have all the advantage to be derived from it, and yet it would be most unjust to make him pay anything. For instance, if a dwelling house, or bar, or room, is solely occupied by one tenant in common, without ousting the other, or a chattel is used by one cotenant in common, nothing is received; and it would be most inequitable to hold that he thereby, by the simple act of occupation or use, without any agreement, should be liable to pay a rent or anything in the nature of compensation to his cotenants for that occupation or use to which to the full extent to which he enjoyed if he had a perfect right.” (emphasis supplied)

32.  It seems to me that these two cases demonstrate that where there is an agreement that a co-owner in sole occupation of the property would pay occupation rent to the other co-owner, it may, depending on the circumstances, be equitable to order the former to account to the latter for occupation rent.  However, this proposition does not assist Ps as they have not pleaded any agreement between Ps and D that D would pay occupation rent for his occupation and use of the Land.  Nor am I aware of any evidence supporting the existence of any such agreement. 

33.  Further, unlike the Wing Ming case, Ps are not alleging that there is any agreement between them and D marking out a common area in the Land, which D has breached.  Hence, the analogy drawn by Godfrey Lam J, with reference to the two old cases, has no application in this case. 

34.  For these reasons, I reject the various bases advanced by Mr Chong to ground his clients’ claim against D for occupation rent.  The order of Master H Au-Yeung of 16 January 2015, where D was directed to “file and serve an account of the income and expenditure received and incurred by him of and for the use and enjoyment of...the Land, inclusive of the letting, use and enjoyment thereof...”, does not detract from the analysis.  It was a procedural order for the further conduct of the present account and inquiry, where the question of whether a particular item (such as occupation rent) should be accounted for or paid to Ps would be determined.  In any case, while I am not privy to what transpired before the learned Master, Ps informed me that the order was made pursuant to the CA Judgment^[12] so it seems to me that the learned Master could not have intended to deviate from the CA Judgment or the CA Order. 

E.     Account

E1.     Law

35.  I bear in mind the guiding principles on the taking of an account and inquiry in common form: Snell’s at §§20-014 to 20-022.  In particular, I highlight the following points. 

36.  The beneficiary carries the burden of proving surcharges and the accounting party bears the burden of proving discharge.  The accounting party must therefore be prepared to document each item, and presumptions may be made against them if they have not kept proper records or have destroyed them.  The court will lean particularly hard against a professional who has kept inadequate records or anyone who destroys records in bad faith.  At the other extreme, a non-professional fiduciary who has acted in good faith may be granted fair and reasonable allowances despite having neglected to keep proper accounts: Snell’s at §20-018. 

37.  In Libertarian at §174, Lord Millett NPJ held that:

“Where the absence of evidence is the consequence of the fiduciary’s own breach of duty, the court is not without resource, for it can have resort to three principles. First, it may be able to take the fiduciary at his own word and use his falsehoods to establish the facts as if they were true even though they are known to be untrue. Secondly, the court is entitled to make every assumption against the party whose conduct has deprived it of necessary evidence. And thirdly the court is entitled to be robust and do rough and ready justice without having to justify the amount of its award with any degree of precision.”

38.  In Malhotra at 322 (right column), Morritt LJ (as his Lordship then was) explained the application of the principle of omnia praesumuntur contra spoliatorem in the context of taking an account: 

“First, if it is found that the destruction of the evidence was carried out deliberately so as to hinder the proof of the plaintiff’s claim, then such finding will obviously reflect on the credibility of the destroyer. In such circumstances it would enable the court to disregard the evidence of the destroyer in the application of the principle. But this is not this case.

Second, if the court has difficulty in deciding which party’s evidence to accept, then it would be legitimate to resolve that doubt by the application of the presumption.  But thirdly, if the judge forms a clear view, having borne in mind all the difficulties which may arise from the unavailability of material documents, as to which side is telling the truth, I do not accept that the application of the presumption can require the judge to accept evidence he does not believe or to reject evidence he finds to be truthful.”

39.  Similarly, in Kao, Lee & Yip (a firm) v Donal Koo Hoi Yan (HCA 8847/1993, 7 June 2007) at §§13-15, Reyes J held that the presumption against an accounting party in favour of the beneficiaries where there is a lack of proper records cannot be the Court’s sole consideration.  Whilst expedient, the presumption is not a licence to draw any inference against the accounting party however unreasonable or disproportionate.  The Court must approach a disputed issue with a measure of realism and pragmatism and must always ask whether the result of any application of the presumption accords with common sense. 

E2.     Between June 1984 and 31 March 1990

40.  D was ordered to render an account since he “has been in control and/or management” of the Land. There is no dispute that the period began in June 1984. 

41.  D claims the rental income received in respect of the Land between June 1984 and 31 March 1985 was HK$3,000 and thereafter HK$3,000 per financial year from 1 April 1985 to 31 March 1990.  According to him, the Land was leased under an oral tenancy and there were no rental receipts.  He does not claim any expenses. 

42.  Whilst Ps initially complained about the lack of evidence on the rental income, they are now prepared to accept (see §43 of their Closing Submissions) D’s figures. 

43.  Accordingly, I find that the net income between June 1984 and 31 March 1985 was HK$3,000 and thereafter HK$3,000 for each of the 5 financial years from 1 April 1985 to 31 March 1990.  

E3.     Between 1 April 1990 and 31 March 1995

44.  D claims he did not receive any rental income nor incurred any expense because the Land was not leased out during the period. 

45.  Ps complain that D failed to produce any evidence.  They contend that D should account for the market rent either on the basis that he should pay occupation rent for his sole occupation of the Land or on the basis of his wilful default.  For reasons explained in Sections C and D above, those two grounds are not open to Ps in the present account and inquiry. 

46.  On balance, and bearing in mind the following factors, I find that the net income for the period is nil. 

46.1   First, D’s authority and obligation under the Division of Family is to collect rent from the Land.  The Court of Appeal found that his accounting obligation is confined to the income received and expenditure incurred in respect of the Land.  The upshot, it seems to me, is that D is not required to ensure that the Land is leased continuously. 

46.2   Second, Ps bear the burden of proving surcharge and their claims that D should account for the market rent are, as I have explained, unsustainable. 

46.3   Third, the present case is unlike the Kao Lee & Yip case, where one would expect solicitors to have kept at least some record of the fees waived.  On the other hand, it is probably uncommercial or unrealistic to expect a non-professional landlord to keep records about why a piece of farmland was unleased for a few years.

46.4   Fourth, I have considered whether I could use D’s statement in his pleading^[13] that since about 1984 and up to the date of his pleading, he “has continued to collect and receive rents from” the Land against him and assume that the Land has been leased out all along since 1984.  In my view, it would be inappropriate to do so as the statement did not assert that the Land has been leased out continuously since 1984. 

E4.     Between 1 April 1995 and 31 March 2004

47.  It is common ground that the annual rental income D received from the Land was HK$120,000 for each of the 9 financial years. 

48.  As for expenses, it is not in dispute that:

48.1   For the financial year ended 31 March 2002, D paid HK$7,387.50 for Government rent. 

48.2   For the financial year ended 31 March 2003, D paid HK$17,730 for Government rent and HK$3,600 for property tax whereas D’s initial claim for HK$18,310.57 for rates should be falsified (or disallowed) for lack of supporting evidence. 

48.3   For the financial year ended 31 March 2004, D paid HK$22,162.50 for rates, HK$17,730 for Government rent and HK$2,803 for property tax. 

49.  In the circumstances, the net income for the period was:

49.1   For the 6 financial years between 1 April 1995 and 31 March 2001, HK$120,000 per year

49.2   For the financial year ended 31 March 2002, HK$112,612.50.

49.3   For the financial year ended 31 March 2003, HK$98,670.

49.4   For the financial year ended 31 March 2004, HK$77,304.50.

E5.     Between 1 April 2004 and 31 March 2015

50.  D’s account for this period is, to say the least, confusing and wholly inadequate. 

51.  For instance, on actual rental income received alone, he produced 3 different versions of accounts. Each later version is said to be an updated version of the earlier, taking into account matters discovered in the intervening period.^[14] 

Year	1st Account (HK$)	3rd Account (HK$)	4th Account (HK$)
1 April 2004 to 31 March 2005	40,000	10,000	10,000
1 April 2005 to 31 March 2006	0	0	0
1 April 2006 to 31 March 2007	30,000	30,000	30,000
1 April 2007 to 31 March 2008	70,000	70,000	70,000
1 April 2008 to 31 March 2009	10,000	10,000	10,000
1 April 2009 to 31 March 2010	50,000	60,000	60,000
1 April 2010 to 31 March 2011	10,000	10,000	40,000
1 April 2011 to 31 March 2012	60,000	60,000	50,000
1 April 2012 to 31 March 2013	110,000	110,000	90,000
1 April 2013 to 31 March 2014	100,000	120,000	120,000
1 April 2014 to 31 March 2015	80,000	110,000	110,000

52.  But a different picture emerges if one considers the assessable value of the Land as shown in the various Property Tax Assessment Demanding Final Tax for the Land (“Tax Demands”) for the period. 

Year	Assessable value (HK$)
1 April 2004 to 31 March 2005	96,300
1 April 2005 to 31 March 2006	96,300
1 April 2006 to 31 March 2007	96,300
1 April 2007 to 31 March 2008	117,637
1 April 2008 to 31 March 2009	120,000
1 April 2009 to 31 March 2010	117,024
1 April 2010 to 31 March 2011	117,024
1 April 2011 to 31 March 2012	117,024
1 April 2012 to 31 March 2013	119,812
1 April 2013 to 31 March 2014	115,812
1 April 2014 to 31 March 2015	106,836

53.  “Assessable value” is defined in section 5B(2) of the Inland Revenue Ordinance (Cap 112) (“IRO”) as follows:

“The assessable value of land or buildings or land and buildings for each year of assessment shall be the consideration, in money or money’s worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or land and buildings.”

54.  Therefore, one would have thought the “assessable value” shown in the Tax Demands for the period represents the rental income in respect of the Land during that period. 

55.  Further still, on D’s own admission, the annual rental income from the Land since 1 April 1995 was HK$120,000.  In particular, D claims that the present tenant has been leasing the Land since around 1997 or 1998 for a monthly rent of HK$10,000.  This is reinforced by:

55.1   The draft (and unsigned) tenancy agreement between D and the tenant for a period of 3 years from 1 January 2009.  Clause 2 provided that the rent would be HK$10,000 per month and clause 5 provided that the landlord would be responsible for rates.  D said the tenant refused to sign the agreement. 

55.2   D’s Statement of Claim in DCCJ 2777/2011 against the tenant where the monthly rent since January 2009 is said to be HK$10,000.

56.  Notwithstanding the aforesaid, D claims that the actual amount of rent received during the 11 financial years under discussion was, as shown in the 4^th Account, much lower because:

56.1   Since around mid 2004, the tenant refused to pay rent and/or paid rent late. 

56.2   D’s bankbooks, which were used to compile the 4^th Account, show the actual amount of rent he had received during the period. 

56.3   D’s daughter filled in the tax returns, which formed the basis of computing the figures set out in the Tax Demands, and erroneously stated the rent received.  He signed the tax returns without checking and therefore did not discover the error. 

57.  I reject D’s claim (as shown in the 4^th Account) for the following reasons. 

58.  First, any irrecoverable rent is deductible if it is proved to the satisfaction of the assessor that it has become irrecoverable.   In re-examination, D said he had tried but failed to obtain a deduction.  However, there is no documentary evidence of D’s attempt.  Had D really tried, he should have no difficulty producing application letter(s), with supporting evidence showing rent was irrecoverable, and response(s) from the Inland Revenue Department. 

59.  Second, beyond D’s bare assertion, there is no documentary evidence that rent during this period is in fact irrecoverable.  On D’s own evidence, he successfully sued the tenant in the District Court (in DCCJ 2777/2011) for HK$70,000 rent in arrears, and the tenant eventually paid up.  There is no further documentary proof of D having made further claims or demands against the tenant for unpaid rent.  I should also say it seems to me that D’s successful District Court action also militates against his claim that he is wary of taking action against the tenant (who he claims is a triad member).  

60.  Third, D’s bankbooks are difficult to follow.  I have tried, but am unable, to decipher how it is said that the bankbooks confirm the actual amounts of rent received by D are the amounts reported in the 4^th Account.  The bankbooks only show sums deposited and withdrawn from the bank account with no explanation at all what the deposits and withdrawals are for.  D has highlighted in the bankbook the entries he claims represent the actual rent received but he has failed to explain how he is able to identify those entries, particularly after so many years.  On his own admission, there are no rental receipts evidencing the amount he has received from the tenant. 

61.  Fourth, I am not at all convinced by D’s assertions in relation to the filing of tax returns.  In his first response to Ps’ objections, he attributed the alleged mistakes in the tax returns to his daughter misreading the bankbooks.  But in his second response, he explained (in relation to the financial year between 1 April 2004 and 31 March 2005) that neither he nor his daughter checked the bankbooks and his daughter filled in the tax return based on his erroneous recollection of the amount of rent he had actually received.   However, when asked during cross-examination what documents did his daughter have when filling in the tax returns, D said he cannot say and does not know.  Leaving all this aside, D has not given a good explanation as to why he has not asked his daughter to give an affirmation to support his account of what had happened.  This is surprising bearing in mind he has had the benefit of legal advice throughout the present proceedings for an account and inquiry. 

62.  Fifth, having regard to the reasons above and also the fact that it is entirely D’s own doing for failing to produce cogent evidence to support his claim of the amount of rent received, but giving due allowance that D is not a professional accountant or bailiff, I think I am entitled to apply the legal presumptions or assumptions, described in the authorities cited at §§36-39 above, against D and disregard his claim (as shown in the 4^th Account) as to the amount of rent he has received for the period under discussion. 

63.  Mr Chong invites me to add back the rates paid to the assessable value shown in the Tax Demands.  He relies on D’s second response to Ps’ objections where D explained that for the financial years 1 April 2004 to 31 March 2005 and 1 April 2009 to 31 March 2010, the assessable value was derived after deducting the rate from the annual monthly rental of HK$120,000. 

64.  The effect of Mr Chong’s submission would be:

Year	Assessable value (HK$)	Rate[15]  (HK$)	Amount asked for by Ps (HK$)
1 April 2004 to 31 March 2005	96,300	23,700	120,000
1 April 2005 to 31 March 2006	96,300	23,700	120,000
1 April 2006 to 31 March 2007	96,300	23,700	120,000
1 April 2007 to 31 March 2008	117,637	5,025	122,662
1 April 2008 to 31 March 2009	120,000	0	120,000
1 April 2009 to 31 March 2010	117,024	7,164	124,188
1 April 2010 to 31 March 2011	117,024	7,164	124,188
1 April 2011 to 31 March 2012	117,024	7,164	124,188
1 April 2012 to 31 March 2013	119,812	188	120,000
1 April 2013 to 31 March 2014	115,812	7,164	122,976
1 April 2014 to 31 March 2015	106,836	13,164	120,000

65.  Having considered the Tax Demands and the demands for rates and Government rent carefully, it appears to me that what had happened was that the person filling in the tax return thought that assessable value meant, contrary to the statutory definition of the term, the annual rental income of a financial year less the rates payable. 

65.1   This is obvious from the 6 financial years ended 31 March 2005, 2006, 2007, 2009, 2013 and 2015.  The total of the assessable value and rate for each of these years add up to HK$120,000, which accords with the available evidence (see §55 above) to the effect that the annual rental income for the Land for each of the 11 financial years under discussion was HK$120,000.  

65.2   For the financial year ended 31 March 2010, as D explained in his second response, only the rate payable for the eastern portion of the Land (i.e. HK$2,976) was deducted from the annual rental income of HK$120,000 but not the rate payable for the western portion of the Land (i.e. HK$4,188).   

65.3   The same reasoning would explain how the respective assessable values for the financial years ended 31 March 2011 and 2012 were arrived at. 

65.4   Similarly, for the financial year ended 31 March 2008, it appears that whoever filled in the tax return only deducted the rate payable for the eastern portion of the Lot (i.e. HK$2,363) but not the western portion (i.e. HK$2,662).  

65.5   Lastly, for the financial year ended 31 March 2014, it appears that the person filling in the tax return only deducted the rate payable for the western portion of the Lot (i.e. HK$4,188) but not the eastern portion (i.e. HK$2,976). 

66.  In the circumstances, I am unable to accept Mr Chong’s submission to the extent that it would result in the annual rental income for 5 out of the 11 financial years under discussion exceeding HK$120,000.  It is true that the Court may, in in an appropriate case, make various legal presumptions or assumptions against an accounting party who fails to produce evidence to support the account put forth.  But these legal presumptions or assumptions are tools that the Court may deploy in order to arrive at a result that is just and accords with common sense on the facts of each case.  Notwithstanding that D’s accounts have fallen short of the standards that the law expects of an accounting party, I consider it inappropriate to accept Mr Chong’s submission to the extent mentioned particularly when it is tolerably clear, as I have sought to demonstrate, what the annual rental income was and how the corresponding assessable value shown in the Tax Demand was arrived at. 

67.  An additional reason for my conclusion is that there is no evidence that D received anything from the tenant over and above the monthly rent.  Indeed, there appears to be no dispute that D (and not the tenant) was responsible for paying rates. 

68.  For all these reasons, I find that, on the balance of the evidence, the annual rental income for the Land for each of the 11 financial years under discussion was HK$120,000 per year. 

69.  Turning to expenses incurred, the parties are in agreement:

Year	Rate  (HK$)	Government rent (HK$)	Property tax (HK$)
1 April 2004 to 31 March 2005	23,700	14,220	1,920
1 April 2005 to 31 March 2006	23,700	14,220	3,081
1 April 2006 to 31 March 2007	23,700	14,220	7,902
1 April 2007 to 31 March 2008	5,025	12,060	470
1 April 2008 to 31 March 2009	0	12,060	1,800
1 April 2009 to 31 March 2010	7,164	11,498	1,755
1 April 2010 to 31 March 2011	7,164	11,498	1,755
1 April 2011 to 31 March 2012	7,164	11,498	1,755
1 April 2012 to 31 March 2013	188	11,498	1,797
1 April 2013 to 31 March 2014	7,164	11,498	1,737
1 April 2014 to 31 March 2015	13,164	11,498	1,602

70.  In respect of property tax, section 5(1) of the IRO provides that it is charged on the net assessable value of land or buildings or land and buildings wherever situate in Hong Kong and section 5(1A) defines net assessable value as the assessable value less (a) the rates where the owner agrees to pay them and (b) an allowance for repairs and outgoings of 20% of the assessable value after deduction of any rates. 

71.  Given the way in which the tax returns were apparently compiled, particularly when it seems that rates deductible were not deducted, there may be some discrepancy between the amount of property tax paid and the amount of property tax that ought to be paid. That said, the parties have not taken issue.  In addition, I have no means to ascertain whether there was in fact any discrepancy, bearing in mind that the actual property tax paid was computed under personal assessment, which may or may not have reduced the tax liability.  Accordingly, I shall adopt the figures agreed by the parties. 

72.  In the circumstances, I find that the net income for the 11 financial years under discussion was:

Year	Net income (HK$)
1 April 2004 to 31 March 2005	80,160
1 April 2005 to 31 March 2006	78,999
1 April 2006 to 31 March 2007	74,178
1 April 2007 to 31 March 2008	102,445
1 April 2008 to 31 March 2009	106,140
1 April 2009 to 31 March 2010	99,583
1 April 2010 to 31 March 2011	99,583
1 April 2011 to 31 March 2012	99,583
1 April 2012 to 31 March 2013	106,517
1 April 2013 to 31 March 2014	99,601
1 April 2014 to 31 March 2015	93,736

E6.     Between 1 April 2015 to 31 March 2018

73.  In the 2^nd Account, D reported that the annual rental income for the 3 financial years was HK$120,000 per year.  The reported figures, at least for the 2 financial years ended 31 March 2016 and 2017, are supported by the Tax Demands for those 2 years. 

74.  In the 3^rd Account, D amended the annual rental income for the financial year ended 31 March 2016 to HK$110,000 and for the 2 financial years ended 31 March 2017 and 2018 to HK$100,000 per year.  The claim was maintained in the 4^th Account. D explained in his second response to Ps’ objections that the amended figures were the actual amount received according to his bankbooks.  He also said the figures in the Tax Demands for the 2 financial years ended 31 March 2016 and 2017 were wrong because he had filled in the tax returns without checking the bankbooks. 

75.  For the first, second third and fifth reasons identified at §§58-60 & 62 above, which are applicable here mutatis mutandis, I reject D’s claim. 

76.  Mr Chong submits that the rates for the 3 financial years under discussion should be added to the annual rental income.  I reject that submission because:

76.1   As I have said above, the evidence on balance is that the annual rental income was HK$120,000.  There is no evidence that the rent was increased at any point during the 3 financial years under discussion.

76.2   Unlike the situation concerning the 11 financial years discussed in section E5 above, there is no evidence, and D has not said, that the assessable value in the Tax Demands for the financial years ended 31 March 2016 and 2017 was derived by deducting rates from the annual rental income. 

77.  Accordingly, I hold that the annual rental income for each of the 3 financial years under discussion was HK$120,000 per year. 

78.  The parties are ad idem in respect of the expenses incurred.  

78.1   For the financial year ended 31 March 2016, D paid HK$9,676 for rates and HK$11,498 for Government rent. 

78.2   For the financial year ended 31 March 2017, D paid HK$11,164 for rates, HK$11,498 for Government rent and HK$1,673 for property tax. 

78.3   For the financial year ended 31 March 2018, D paid HK$11,164 for rates, HK$11,499 for Government rent and HK$1,674 for property tax. 

79.  In the premises, the net income for each of the 3 financial years under discussion was:

79.1   For the financial year ended 31 March 2016, HK$98,826.

79.2   For the financial year ended 31 March 2017, HK$95,665.

79.3   For the financial year ended 31 March 2018, HK$95,663.

E7.     Other expenses claimed by D

80.  D claims legal costs and disbursements in relation to DCCJ 2777/2011 (totalling HK$171,005) and for costs of fencing the Land (in the sum of HK$20,000).  D claims the fencing work was later abandoned. 

81.  During cross-examination, D confirmed he does no request for the legal costs to be included in the account as a discharge.  He said his solicitors took care of the matter and he did not request them to include the legal costs in the account.  In respect of the fencing costs, he also agreed when cross-examined that he would not claim the same. 

82.  Ms Chan complains that the answers were “unfairly extracted” from D.^[16]  I do not agree.  The cross-examination was conducted in Punti, which D has no trouble understanding or speaking.  Mr Chong was entitled to ask the questions he did.

83.  Ms Chan then submits that the supporting documents concerning the claim “can hardly be disputed” and it is clear that “payment was made”.^[17]  I am not sure she is right either.  I have only been shown fee notes from D’s solicitors (the same firm of solicitors presently acting for him), which are plainly not receipts, and a document from a construction company recording the labour and material costs for erecting a fence, which does not appear to be a receipt.  In other words, there is no evidence of payment or that D has incurred such expenses. 

84.  For these reasons, I consider D is not entitled to claim the legal costs and the fencing costs.

85.  As for the rates and Government rent for the Land for the financial year ended 31 March 2019, I agree with Mr Chong’s submission that it is not appropriate to deal with them now bearing in mind D has not yet accounted for any income received for that year.  In this regard, for financial years that D claims there was no rental income, he would put nil in his account.  However, in the 4^th Account, D left the relevant box empty but did not put nil thus suggesting that he has yet to account for any income received that year. 

E8.     Summary

86.  Taking into consideration all my findings made above, the account of the income and expenditure received and incurred by D of the Land is set out at Annex 1 to this Judgment. 

87.  Mr Chong seeks an order, and I so order, that D do pay Ps the sum due to them in respect of their share of the Land, which represents one quarter of the total net income.  Based on the account in Annex 1, the total net income is HK$2,357,266 and ¼ of that is HK$589,316.50. 

F.     Interest

88.  Ps claim both pre-judgment and post-judgment interest on the sum found to be payable by D to them.  

89.  Insofar as pre-judgment interest is concerned, Ps’ claim is predicated on section 48 of the High Court Ordinance (Cap 48) or in equity.^[18] Mr Chong asks for either compound interest, on the basis that D had allegedly wrongfully profited from his misconduct, or simple interest at 1% over prime. 

90.  Ps’ claim is fatal as they have not pleaded any claim for interest in either the statement of facts in the body of their Statement of Claim or in the prayer.  See Order 18 rule 8(4); Tai Ying Fat v Many Harvest Construction Co Ltd (HCCT 47/2009, 21 November 2011) at §§17-18 (Saunders J); Hong Kong Civil Procedure (2020), Vol 1, §18/8/8. 

91.  Further, the CA Order did not order or award any pre-judgment interest on the sum found to be payable by D to Ps, presumably precisely because Ps did not plead such interest. 

92.  The case that Mr Chong cites, i.e. Lee Yuk Shing v Dianoor International (in Liquidation) (CACV 185/2015, 23 May 2016), is distinguishable because although the plaintiff in that case did not plead breach of contract, the material facts pleaded in his pleading supported such a claim and the prayer asked for a declaration that the plaintiff is entitled to return the purchase price and commission paid. 

93.  It should also be said that notwithstanding that Ms Chan had already taken the pleading point in her Opening Submissions (at §§29-33), Mr Chong never applied to amend Ps’ pleadings. 

94.  Insofar as post-judgment interest is concerned, I will make the usual order for post-judgment interest on the sum payable by D to Ps at judgment rate from the date of this Judgment until full payment. 

G.     Conclusion

95.  For all the above reasons, I order that D do pay Ps the sum of HK$589,316.50, as their share of the net income from the Land for the period between June 1984 and 31 March 2018, together with interest thereon at judgment rate from the date of this Judgment until full payment. 

96.  There is no reason why Ps should not get their costs.  I make a costs order nisi that D is to pay Ps’ costs of and incidental to the present application for an account and inquiry, including all reserved costs and any costs not covered by previous orders, to be taxed if not agreed with certificate for one counsel. 

97.  Mr Chong invites me to give liberty to apply to cater for eventualities and to correct any mistakes in my calculations.  Insofar as there are any clerical or calculation mistakes, there are redress mechanisms under the Rules of the High Court that parties may resort to in an appropriate case.  That said, I see no reason in principle against ordering liberty to apply, and I so order.  

HCA 2089 of 2009

Annex 1

HCA 2089/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2089 OF 2009

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J U D G M E N T

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1.  In this action, the 1^st and 2^nd Plaintiffs, Tang Tak Sum (鄧德森) and Tang Tak Chuen (鄧德全), claim against the Defendant, Tang Kai Fong (鄧啟芳), for an order requiring the Defendant to give a true and proper account of all his dealings with the agricultural land lot known as Lot 581 in Demarcation District 130, Tuen Mun, New Territories (“the Land”) including all income and expenditure thereof and other injunctive relief enjoining the Defendant from using the Land for any unauthorised development.

2.  It is the Plaintiffs’ case that in 1939, the Land was in accordance with Chinese customary law being set aside as ancestral worship land (嘗田)[1] and, as such, all income generated by the Land could only be used for ancestral worship purpose. The trust is binding upon all successors in title including the Plaintiffs and the Defendant. Further, the Defendant is under a duty both under Chinese law and custom and by reason of the fiduciary character of the duty imposed under Hong Kong law (a) to give an account of the income and expenditure of the Land to members of the Tang family (as set out in the Schedule to the Statement of Claim) whenever required of him, and (b) to protect the Land against being used for any purpose which might affect the interest of the Tang family including the Plaintiffs.

3.  Alternatively, if the Plaintiffs fail in their primary case, they contend that the Defendant, as one of the co-owners of the Land, is under a duty to give an account of the income and expenditure of the Land to the Plaintiffs, and to protect it against being used for any purpose which may affect the interest of the Plaintiffs as co-owners.

4.  The Defendant denies that the Land is subject to any ancestral worship trust. Alternatively, the Defendant contends that if an ancestral worship trust was created over the Land in 1939, the conditions arising out of such trust have been released and discharged by the express agreements and/or conduct of all the owners of the Land at the time.

5.  Further, the Defendant claims adverse possession against the Plaintiffs’ ¼ undivided share in the Land on the basis that he and his predecessor in title have for a continuous period of not less than 20 years been in continuous and undisturbed possession of the Land to the exclusion of the Plaintiffs’ and their predecessor in title. The Defendant counterclaims a declaration that the title of the Plaintiffs’ predecessor in title or the Plaintiffs (as the case may be) to the ¼ undivided share in the Land has become extinguished by virtue of s 17 of the Limitation Ordinance (Cap 347) and that he has acquired a possessory title to the Plaintiffs’ ¼ undivided share in the Land.

BACKGROUND FACT

6.  The following background fact is not in dispute.

The Tang Family

7.  Tang Lun Kwai (鄧聯桂) had 3 sons, 鄧貞華, 鄧祖發 and Tang Cheung Mou (鄧暢茂) deceased (“the Deceased”). Amongst them, only鄧祖發 and the Deceased had male successors. 鄧祖發 had 2 sons, 鄧田綠 and 鄧松偉, both of whom did not have any male successors.

8.  The Deceased was ordinarily resident in Hong Kong when he died on 12 November 1965 at the age of 93. Prior to his death, the Deceased had a lawful wife and 4 concubines who together gave birth to 4 sons.

9.  The 4 sons according to their seniority were 鄧裕根, Tang Shui Sang (鄧水生), Tang Yuk Lam (鄧煜林) and Tang Tung Chiu (鄧棟潮). The respective families of the 4 sons were treated by the Deceased as sub-units within the family and were referred to as the 1^st, 2^nd, 3^rd and 4^th “fong” (房).

10.  As 鄧裕根 pre-deceased the Deceased, the head of the 1^st fong became Tang Yau Shing (鄧佑盛), who was the eldest son of 鄧裕根.

11.  The members of the Tang family including the 4 fongs are set out in Attachment 1 to the witness statement of the Defendant dated 31 March 2012, which is annexed to this Judgment.

12.  Until 13 June 1984, the heads of the 4 fongs were: Tang Yau Shing (1^st fong); Tang Shui Sang (2^nd fong), Tang Yuk Lam (3^rd fong) and Tang Tung Chiu (4^th fong). I will refer to them as “Heads of 4 fongs”.

The Land

13.  At all material times up to his death, the Land was registered in the name of the Deceased’s late father, Tang Lun Kwai.Although the Landwas never registered in the name of the Deceased, there is no dispute that the Deceased was the lawful successor of the Land.

14.  By a document dated the first lunar month of 1939 and entitled “鄧暢茂分冊”written by the Deceased in Chinese (“Division of Family”), the Deceased set out his wish as to how the various lots of land and houses then owned by him should be allocated and used amongst the 4 fongs.

15.  The first part of the Division of Family stated, inter alia, as follows:

“立分冊父鄧暢茂…余年近七旬 故將田園屋宇均派四房各執管業 以昭平允 惟望兒孫各人竭力營生大振家聲 其餘父母需用口糧之田園 要待至父母用完之日 任由兒孫蠲貯創積 以作嘗贍之用 惟土名瓦窯墩苗田壹瓦租谷即撥歸佑盛所收 作為油燈之用 其田仍歸嘗業 而佑盛亦要補足糧銀 特此註明 以昭平允 俾得永承先業而勿替焉 以斯為囑”

16.  The Land the subject matter of this action was described as “土名瓦窯墩苗田” in the first part of the Division of Family.  

17.  It can be seen from the first part of the Division of Family that the Deceased intended to divide the lots of lands and houses then owned by him into 3 categories, namely:

(1)   “田園屋宇均派四房各執管”,being the lands and houses specifically allocated and given to each of the 4 fongs. For convenience, these lots of land and houses will be referred to as “Specific Land”.

(2)   “其餘父母需用口糧之田園 要待至父母用完之日 任由兒孫蠲貯創積 以作嘗贍之用”, the remaining lands, that is, those lands which were not allocated to the 4 fongs, shall be used by the parents during their lifetime and, thereafter, shall be used as “嘗贍”, that is, to provide for the needs of ancestral worship[2]. These lots of land will be referred to as “Common Land”.

(3)   “惟土名瓦窯墩苗田壹瓦租谷即撥歸佑盛所收 作為油燈之用 其田仍歸嘗業 而佑盛亦要補足糧銀”, this relates to the Land. The rental income generated by the Land shall immediately be allocated to Tang Yau Shing and be used by him for ancestral worship purpose (作為油燈之用). The Land shall remain an ancestral worship property (嘗業)[3] and, if the income generated by the Land is not sufficient to defray the expenses of ancestral worship, Tang Yau Shing  shall make up the shortfall. 

18.  A copy of the first part of the Division of Family was given to the Heads of the 4 fongs.

19.  The allocation of the Specific Land was described in 4 annexures to the Division of Family, which were given to and retained by the Heads of the 4 fongs.

20.  By letter dated 13 December 1969, Tang Yuk Lam (the head of the 3^rd fong and father of the Plaintiffs) complained to Mr Brook Bernnachi QC alleging misuse or mis-management of certain unspecified Common Land by the head of 4^th fong, Tang Tung Chiu.

21.  By another letter dated 21 January 1973, Tang Yuk Lam complained to the District Officer, Yuen Long, alleging that no manager (司理) had been appointed over the Common Land but that Tang Tung Chiu and 鄧松偉 had usurped the function and power of manager, and urged the District Officer not to approve their appointment until a family meeting  was  held to discuss the matter.

22.  In a letter dated 18 August 1975 signed by the Heads of 4 fongs, the parties agreed to sell 2 plots of land at Lots 495A and 496RP in DD 132 and to deposit the sale proceeds into their joint bank account for the purpose of defraying estate duty payable by them.

Succession and registration under New Territories Ordinance

23.  By a memorial dated 7 January 1976 (“1976 Memorial”), some of the lots of land referred to in the Division of Family were divided into 2 groups and were formally succeeded by the Heads of 4 fongs as follows:

(1)   40 lots in DD 130 and DD 132 wholly owned by the Deceased including the Land were succeeded by and registered in the names of the Heads of 4 fongs as tenants-in-common as to ¼ undivided share each; and

(2)   116 lots in DD 124, 130 and 132 and Tsz Tin Wai in which the Deceased had ½ undivided share were succeeded by and registered in the names of the Heads of 4 fongs as tenants-in-common as to 1/8 undivided share each.

24.  The registration of the 1976 Memorial was made pursuant to the Land Registration Ordinance (Cap 128) (“LRO”) and s 17 (now repealed) of the New Territories Ordinance (Cap 97) (“NTO”).

25.  Mr KM Chong, counsel for the Plaintiffs, suggests that the lots of land referred to in the 1976 Memorial included both the Common Land and the Specific Land. This does not appear to be correct, as lot no. 615 and 621 in DD 132 and Tsz Tin Wai lot no. 24 and 104, which were some of the Specific Land allocated by the Deceased to Tang Shui Sang as head of the 2^nd fong, and formally succeeded by Tang Shun Wing (鄧順榮), Tang Chun Pang (鄧振鵬) and Tang Tak On (鄧德安) as successors in the Approval Letter of Succession dated 22 December 1999, were not amongst the lots listed in the 1976 Memorial.

26.  Tang Yau Shing (the head of 1st fong) died on 13 June 1984. By a memorial dated 12 August 1986, the Defendant succeeded all the rights and interests in which Tang Yau Shing (鄧佑盛) had in the lots of land (including the Land) with effect from 14 June 1984 pursuant to s 17 of the NTO.

27.  By a deed of gift dated 17 July 1991 registered under the LRO and the NTO, Tang Shui Sang (the head of 2^nd fong) gifted all his interests in the lots of land (including the Land) to his son, Tang Shun Wing. By another deed of gift dated 13 October 1995, Tang Shun Wing in turn gifted all his  interests in the lots of land (including the Land) to himself and his 2 brothers, Tang Chun Pang and Tang  Tak On  as tenants-in-common as to 1/3 undivided share each. 

28.  By an assignment dated 23 January 1997, Tang Shun Wing, Tang Chun Pang and Tang Tak On as the beneficial owner of ¼ undivided share in the Land, assigned their ¼ undivided share in the Land to the Defendant for HK$300,000.

29.  By another assignment dated 27 January 1997, Tang Tung Chiu (the head of 4^th fong) assigned his ¼ undivided share in the Land to the Defendant for HK$100,000.

30.  Consequently, since 27 January 1997, the Defendant has been holding ¾ undivided share in the Land. 

31.  The Division of Family was registered in the Tuen Mun New Territories Registry by memorial no. 883298 on 18 January 1999.

32.  On 17 September 2004, Tang Yuk Lam (the head of 3rd fong) passed away. Probate of his will was granted to his eldest son, the 1^st Plaintiff, on 27 September 2006.

33.  By an assent dated 4 August 2007, all the interests of Tang Yuk Lam in the various lots of land (including the Land) were vested in the 1^st and 2^nd Plaintiffs absolutely as tenants-in-common in equal shares.

Use of the Land and enforcement actions

34.  There is no dispute that upon the creation of the Division of Family, all the income generated by the Land was received by Tang Yau Shing.

35.  Upon succeeding his father’s interest in the Land in 1986, the Defendant continued to receive all the income generated by the Land. Since at least 1990s, the Defendant has leased the Land to various  tenants in return for rental income. The last tenant operated a public car park on the Land, which is not a permissible use of the Land.

36.  Until about July 2009, neither Tang Yau Shing nor the Defendant has ever been asked by any member of the Tang family to account for the income generated by the Land, whether to the Heads of 4 fongs or their successors in title.

37.  By an enforcement notice dated 18 December 2006, the Planning Department required the 1^st Plaintiff (as executor of the estate of Tang Yuk Lam) and the Defendant to discontinue the unauthorized development on the Land by 18 March 2007 failing which they would be liable to be convicted and fined.

38.  By another letter dated 2 July 2009, the Planning Department stated that the use of the Land as a car park was not an authorised development and required the 1^st Plaintiff and the Defendant to discontinue such use immediately.

39.  By letter dated 15 July 2009, the Plaintiffs through their solicitors, Messrs Arthur Au & Co (“AAC”), referred to the letter from the Planning Department and complained that the Defendant had mis-managed the Land and failed to render any report in respect of the Land including whether the entire Land had been leased out and how much rental had been generated. The Plaintiffs required the Defendant to provide full details of all the leases concerning the Land within 14 days.

40.  The Defendant through his then solicitors, Messrs Leung Kin & Co. (“LKC”), replied to the Plaintiff’s requests on 8 August 2009. In essence, the Defendant contended that his father had acquired the beneficial ownership of the Land during the lifetime of the Deceased and, upon the death of the Deceased, his father acquired both the beneficial and legal ownership of the Land, in recognition of the important status of the 1^st son in the family.  The Defendant said that despite repeated requests, the Plaintiffs failed to transfer their ¼ undivided share in the Land to him.

41.  By another enforcement notice dated 11 August 2009 issued to the 1^st Plaintiff and the Defendant, the Planning Department required them to discontinue the unauthorised development by 11 November 2009.

42.  In the letter dated 18 August 2009, AAC referred to the enforcement notice of 11 August 2009 and demanded the Defendant, as “manager” of the Land to account to the Plaintiffs of the use of the Land including details of the leases and the rental received from the Land.

43.  In response, the Defendant through LKC’s letter dated 27 August 2009 reiterated that the Plaintiffs have no beneficial interest in the Land and required them to assign their ¼ share in the Land to him.

44.  By letter dated 31 August 2009, AAC on behalf of the Plaintiffs reiterated that the Defendant as “manager” of the Land has a duty to account to the Plaintiffs including providing details of the leases and the income received from the Land, and stated that the Plaintiffs would not assign their rights and interests in the Land to the Defendant.

45.  On 13 October 2009, the Plaintiffs commenced his action against the Defendant.

DISCUSSION

46.  The issues between the parties, as defined by the pleadings and clarified during counsel’s submissions, are as follows:

(1)     Whether the Division of Family could by itself create an ancestral worship trust over the Land.

(2)    If an ancestral worship trust was created over the Land by the Division of Family, whether such trust may exist alongside the registration system under the NTO.

(3)     If an ancestral worship trust was created over the Land by the Division of Family:

(a)   whether the conditions under such trust were released and discharged by the express agreements and/or conduct of all the owners of the Land at  the time (being the Heads of 4 fongs).

(b)   whether the Plaintiffs are estopped from asserting that any conditions arising from such trust by reason of  the representation of their predecessor in title and the reliance by the Defendant’s predecessor in title.

(4)    Whether the Defendant is under a duty to account to the members of the Tang family in respect of the Land under Chinese law and custom and by reason of the fiduciary character of the duty imposed on the Defendant under Hong Kong law.

(5)    Whether by virtue of his position as a co-owner of the Land, the Defendant is under a duty to account to the Plaintiffs in respect of the Land.

(6)    Whether the Defendant has through himself and his predecessor in title acquired possessory title of the Plaintiffs’ ¼ undivided share by virtue of the Defendant’s (and his predecessor in title’s) dealings and continuous exclusive possession of the Land for more than 20 years.

Was an ancestral worship trust created over the Land?

47.  It is common ground that by virtue of s.13 of the NTO, in any proceedings in relation to land in the New Territories, the court shall have power to recognise and enforce Chinese custom or customary right affecting such land.

48.  Moreover, as Chinese law and custom is part of the law of Hong Kong, the court can find this law either in the form of expert evidence or in textbooks and judicial decisions (Re Tse Lai Chiu, deceased [1969] HKLR 159 at 175, per Hogan CJ; Tang Yau Yi Tong & anor v Tang Mou Shau Tso & ors [1995] 2 HKC 245 at 252A-D; Fan Kam Ching v Yau Shiu Hing [1986] HKDCLR 14 at 17).

49.  In §§28-32 of his opening submissions, Mr KM Chong, counsel for the Plaintiffs, relies on the opinion of Professor Chang and contends that “by the Division of Family, the Deceased had inter vivos set up a customary Chinese trust on a number of land lots including the Land for ancestral worship. That part of the ancestral worship trust, ie the Land Lot, was expressed to take effect after the death of the Deceased and his wife”[4] and is in the nature of a “perpetual trust for the benefit of the 4 Fongs”. This is consistent with the Plaintiffs’ case as pleaded in paragraph 3A of the Re-Amended Reply.

50.  In §8 of his supplemental opening submissions, Mr Chong submits that the ancestral worship trust over the Land “was expressed to take effect immediately while the remaining land lots would be used for ancestral worship only after the death of the Deceased and his wife”. It appears that the change of stance is necessitated by Mr Chong’s acceptance of Mr Shum’s point (in §17(6) of his opening submissions,)  that in ReLau Wai Chau (2000) 3 HKCFAR 98, the Court of Final Appeal held that Chinese customary law does not recognise testamentary dispositions. As a result of this revised submission, on day 3 of the trial, the Plaintiffs obtained leave to amend §3A of the Re-Amended Reply by deleting the words “from the date of the death of the [Deceased]”. However, the revised submission is inconsistent with  opinion of Professor Chang, who opines that the Land would only be turned into ancestral worship trust after the death of the Deceased (as stated in §51(2) below).

51.  In his Opinion, Professor Chang states that:

(1)   The Division of Family contains a “bidding” evidenced by the word “囑”, whereby the Deceased told his descendants why and how his property was to be divided, distributed and used.

(2)   The intention of the Deceased was clear, he wanted to divide his property and distribute them to his 4 sons in equal share, and reserve some other property including the Land, to provide for himself and his wife during their lifetime, and to turn them into ancestral worship property after their death.

(3)   The Land was not given to Tang Yau Shing as a gift. Instead, the “bidding” specifically said that Tang Yau Shing was only to collect rental from the Land during his lifetime, which was a “favour” as otherwise the 4 fongs would take turn to collect the rental for a period of time. The rental collected was to be used by Tang Yau Shing to pay the cost of keeping the ancestral worship oil lamp.

(4)   The Deceased imposed 2 conditions on the Land: (a) the Land “was to be a part of the property he left behind as ancestral property”, which he says is “obviously to deny Tang Yau-shing any claim of ownership of [the Land]” and (b) being the collector of the rental, tang Yau Shing was to “make up the deficit” and pay the land tax on the Land in full.

(5)   The Land was ancestral worship property and, as such, “belongs to a family”. If such property were to be divided, it had to be distributed to all the branches of the family. It can never be “given” to a particular member.

(6)   “[T]he purpose of all the arrangements was to enable the family members to hold in perpetuity the property left to them by their ancestors and never to lose it.”  It is clear, says Professor Chang, that the Deceased had no intention to let Tang Yau Shing or, indeed, anyone of his descendants, to be the sole owner of any part of the ancestral worship land, including the Land.

52.  In his oral evidence, Professor Chang confirms 3 times in answer to the questions posed to him that after creation of the Division of Family, the Deceased remained the owner of all his property and was at liberty to change his mind and deal with his property including the Land in any other way he liked. This evidence in my view confirms that Mr Chong’s revised submission (as set out in §50 above) is untenable, for the simple reason that the Division of Family did not dispose the Deceased’s ownership or interest in the Land.

53.  Mr Erik Shum, counsel for the Defendant, submits that the Plaintiffs’ contentions must fail because under Chinese law and custom, the Division of Family could not be effective as a testamentary script of the Deceased. It only contained a list of intended inter vivos dispositions. Such intention would not have the effect of vesting the Land to an ancestral worship trust. Mr Shum submits that these principles of Chinese customary law were already decided by the court in ReLau Wai Chau (2000) 3 HKCFAR 98, which is binding on this court. It is not properly open to the Plaintiffs to rely on the opinion of Professor Chang, to the extent that it is inconsistent with the conclusions on the state of Chinese customary law reached by the court in ReLau Wai Chau.

54.  In my view, Mr Shum’s submissions are well founded. The principles of Chinese customary law germane to the first issue were considered and decided by the court in Re Lau Wai Chau with the benefit of the evidence from 4 experts (including Professor Chang). This can be seen from the following passages of the judgment of the Court of Final Appeal:

“Only one of those submissions is renewed before us. In so renewing it, the appellants begin by accepting that under Chinese law and custom no ancestral worship trust can be created by will for the simple reason that Chinese law and custom does not recognise testamentary dispositions.” (at 103D-E) (underlining added)

“What it takes to create an ancestral worship trust

The Judge’s conclusion that Chinese law and custom required positive steps for the creation of an ancestral worship trust was a conclusion reached with the benefit of expert evidence which he accepted. Such evidence came from all three of the fourth fong’s experts on Chinese law and custom, namely Professor Anthony Dicks SC, Professor Hugh baker and Mr Michael Palmer, all of whom gave evidence against the existence of the alleged ancestral worship trust.

Since that conclusion of the Judge’s as to the state of Chinese law and custom was affirmed by the Court of Appeal and since the appellants no longer dispute that conclusion, it is unnecessary to deal with the expert evidence at length. But the evidence of Professor Dicks, who needs no introduction in our courts, is particularly illuminating in regard to the “intention/subject matter/beneficiaries” submission. The Judge dealt with Professor Dicks’s evidence by saying that Professor Dicks:

‘… said that the wording of the Codicil clearly indicated that the intention of the Ancestor was to create from his remaining properties an endowment in perpetuity for the maintenance of ancestral worship. Under customary law, this appeared to be a valid, as well as extremely common, type of provision in a Chinese will of the traditional sort. He said that executors or administrators or trustees who succeeded them, in reliance on it, could properly have had the properties in question registered in the appropriate district office either in the name of the deceased t’ong or in the name of its linear descendants (i.e. in one of its own names with the suffix “Tso”), appointing managers in the usual way. In traditional China, the proper method of carrying the deceased’s intention into effect would have been to draw up an agreement between all eight Fongs to establish the endowment and to make an official report to the Office of the County Magistrate in accordance with a decree to that effect of the 18^th Year of Qianlong, but in the New Territories these formalities were replaced in effect by registration. But as no such steps had taken place, no ancestral worship trust was created in this case.’

Professor Dicks also said ¾ and the Judge also accepted ¾ that the function of a will in traditional China was largely to transmit moral instructions and precepts for the conduct of family affairs.” (at 104G-105E) (underlining added)

….

“As to how such endowments are to be made under Chinese law and custom, the conclusion to be reached (with the benefit of the expert evidence accepted by the Judge whose acceptance thereof was affirmed by the Court of Appeal and is not challenged before us) is as follows. Such endowments are to be made either by steps taken by someone in his lifetime to carry out his own wishes or by steps taken by heirs in their lifetime to carry out the wishes of a deceased ancestor. In either case the person or persons taking such steps is the settlor or are the settlors. Thus by the very nature of ancestral worship trusts, the only kind of disposition that can create an ancestral worship trust is an inter vivos disposition.” (at 105I-106A) (underlining added)

55.  Mr Chong submits that the above conclusions on the state of Chinese customary law reached by the court in Re Lau Wai Chau and affirmed by the appellate courts should not be followed. He points to the following passage in Lau Yue Kui (administrator of estate of Lau Wai Chau, deceased) v Estate of Lau Leung Chau, deceased & ors [1998] 1 HKLRD 579, at 593J-594B, and submits that such holding was erroneous as none of the experts called by the parties gave such evidence:

“The ancestral worship trust is an unique institution created by Chinese law and custom. It involves the actual setting up of a tso or tong. This had not been done during the lifetime of the ancestor or by his descendants after his death. The failure to establish an ancestral worship trust under Chinese law is not confined simply to lack of testamentary capacity of the ancestor. The actual creation requires positive steps to be taken. It would be imprudent and infeasible to marry two unique concepts, namely the English trust concept and the Chinese ancestral worship trust concept simply on the basis that it was the intention of the ancestor to create such a [sic] endowment. The ramification of marrying these two unique concepts is unknown and it is too uncertain for one to attempt such an exercise.” (underlining added)

56.  Mr Chong submits that I should accept the opinion of Professor Chang (set about in §51 above) and conclude that the Division of Family could by itself create an ancestral worship trust over the Land immediately, and that such trust was binding on all members of the family including the Plaintiffs and the Defendant and their predecessors in title.

57.  I do not agree with Mr Chong’s submissions. It is clear from the judgment of Cheung J (as then was) in Lau Yue Kui  that all 4 experts on Chinese customary law including Professor Chang (the Plaintiffs’ expert in this action) had given evidence to the effect that to create an ancestral worship trust over the land, a tong or a tso would have to be set up, and the land would need to be registered in the name of such tong or tso (at 591A-J).

58.  I agree with Mr Shum that I should follow and apply the principles of Chinese customary law as stated in ReLau Wai Chau, insofar as they are applicable to the issues raised by the parties. It follows that I do not accept Professor Chang’s opinion as summarised in §51(4)-(6) above, where he states that the Division of Family could by itself create an ancestral worship trust over the Land immediately, and that such trust remains binding on all members of the family, including the Plaintiffs and the Defendant.

59.  In the present case, there is no suggestion that either the Deceased or the Heads of 4 fongs has taken any step during their lifetime to create an ancestral worship trust over the Land. The Land has never been transferred to or held in the name of a t’ong or t’so of the Tang family. Nor has any manager been appointed to represent such t’ong or t’so in accordance with s 15 of the NTO. To the contrary, the Heads of 4 fongs formally succeeded the Land under s. 17 (now repealed) of the NTO by registering themselves as tenants-in-common as to ¼ undivided share each. Applying the state of Chinese customary law as found by the court in Re Lau Wai Chau, I hold that no ancestral worship trust was created over the Land, whether during the lifetime of the Deceased or upon his death.

60.  It follows that the Plaintiffs’ primary case that the Division of Family could by itself create an ancestral worship trust over the Land must fail.

Whether the ancestral worship trust (if created by the Division of Family) may exist alongside the registration system under NTO

61.  If I am wrong in my above conclusion, such that the Division of Family could by itself create an ancestral worship trust over the Land immediately, it is necessary to consider whether such trust is still binding upon the Plaintiffs and the Defendant, in light of the act of the Heads of 4 fongs in registering themselves as tenants-in-common as to ¼ undivided share in the Land in 1976.

62.  As Mr Shum submits, the devolution of title to land in the New Territories is regulated by the registration system under the NTO and the general law of Hong Kong. The principle was explained by the Privy Council in Wu Koon Tai v Wu Yau Loi [1997] AC 179 at 187E-188B in this way:

“… It is plain that, after the Peking Convention, the whole system of land tenure in the New Territories was fundamentally altered. Leases from the Crown were substituted for old titles under the pre-existing law. A system for deducing title to such leases was imposed, dependent upon the registration of deeds. To allow the old customary land law to cut across and to trump the new system would be to defeat its whole purpose.

This view is supported by the provisions of sections 15, 16 and 17 of the Ordinance of 1910 which expressly modified the general system of registered conveyancing to take account of special Chinese institutions. Section 15 deals with the case where lands belong, under Chinese law, to a clan or family; it provides for a manager of such lands to be registered, he having full power of disposition of all the family lands. Section 16 also deals with family lands. Section 17 is directed to dealing with the problem of succession on death. It recognises that under Chinese law, which is to continue to regulate rights of succession, it is improbable that the full procedure of taking a grant of probate or letters of administration will be followed. It provides for the registration of the successor to the land and the vesting of the land in the registered successor.

In their Lordships’ view, the devolution of title to land in the New Territories, whether by inter vivos transaction or on death, is regulated by the registration systemand the general law of Hong Kong. It follows that in the present case title to the land was never vested in the son since, although entitled to be registered as successor to the father, the son was never in fact so registered. It follows that the son cannot have transferred title to the purchaser by the 1934 document. The title to the land was vested by virtue of section 17 directly in the grandson when, in 1951, he was registered as successor to the father. The title to the land is now vested in the defendant.” (underlining added)

63.  Section 17 of the NTO (now repealed) provided as follows:

“the Land Officer, on ascertaining the name of the person who is so entitled to such land in succession to the deceased person (hereinafter called the successor), and on being satisfied that any estate duty which may be due has been paid, shall register the name of the successor, and upon such registration being effected the said land shall vest in the successor for all the estate and interest of the deceased person therein, or for such estate and interest as shall be entered on the register by the Land Officer against the entry of the name of the successor….” (underlining added)

64.  In Yau Kwai v Yau Kar Siu [2004] 4 HKC 141, a case which bears some similarity to the fact of this case, the lot had since 1960 been registered in the names of the sons and grandsons of the deceased as tenants-in-common. The court rejected the plaintiffs’ case that under Chinese customary law, the lot was family property, and that neither the 1^st nor the 2^nd defendant prior to the division of the family had any share in the lot, and therefore they had nothing to sell; alternatively, any such share could not be disposed of without the consent of all the co-owners. Tang J (as he then was) held that the devolution of title in the New Territories is not governed by Chinese customary law. Upon registration of the land in the names of the sons and grandsons of the deceased, they became the beneficial owners of the land and hold their share as tenants-in-common (at §§16-36).

65.  The principles propounded in Wu Koon Tai v Wu Yau Loi and Yau Kwai v Yau Kar Siu are directly applicable to the present case.

66.  Thus, even if Professor Chang’s opinion on the intention of the Deceased in creating an ancestral worship trust over the Land (as set out in §51(1)-(2) above) is correct, which appears to be not in dispute, it is clear that the intention of the Deceased, insofar as it relates to the Land, was never carried through. Instead, it was defeated by the act of the Heads of 4 fongs in registering themselves as tenants-in-common of the Land in 1976. Upon such registration, the title to and all the estate and interest which the Deceased had in the Land was vested in the Heads of the 4 fongs.

67.  For this additional reason, I reject the Plaintiffs’ primary case that the Defendant remains bound by the ancestral worship trust, even if one were created by the Division of Family over the Land.

Discharge and estoppel

68.  The Defendant advances 2 further defences to the Plaintiffs’ primary claim, namely:

(1) the conditions under the ancestral worship trust were released or discharged by the express agreements or conduct of the Heads of 4 fongs; and

(2) the Plaintiffs are estopped from asserting that the conditions of the ancestral worship trust remain binding upon the Defendant by reason of the conduct and representations of their predecessor in title (ie Tang Yuk Lam), and the reliance by the Defendant’s predecessor in title (ie Tang Yau Shing) as pleaded in §5.2 of the Amended Defence.

69.  These defences only arise if, contrary to my conclusions on the first 2 issues, an ancestral worship trust was created over the Land in 1939, which was binding upon the Heads of 4 fongs, and the trust survived notwithstanding the registration by the Heads of 4 fongs in 1976 as tenants-in-common of the Land.

70.  In response, the Plaintiffs in §7 of the Re-Amended Reply plead that since 1965 and until “recently”, the Division of Family had been performed by the Defendant and his predecessor in title as well as members of the other fongs in that “the income and profit to be derived from the [Land] have always been used for the benefit of the Tang family in accordance with Chinese custom as the use of ‘Sheung Tin (嘗田)’ and that members of the Tang family have been enforcing Chinese custom for all benefit to be derived therefrom to be used and applied for the sole benefit of the Tang family”.  In their closing submissions, the Plaintiffs submit that in §7 of the Re-Amended Reply and §9 of the Statement of Claim, a case for estoppel by convention has been pleaded. I am unable to see how either paragraph can be said to contain a case for estoppel by convention. In any event, as will be seen further below, the Plaintiffs’ own evidence is directly contradictory to the case pleaded in §7 of the Re-Amended Reply.

71.  So far as express agreements or conduct is concerned, the Defendant contends that by registering themselves as tenants-in-common of the Land in 1976, there was an “unanimous agreement in writing of all the successors” of the Deceased, being the Heads of 4 fongs, that the wish or provision in the Division of Family in relation to the Land was not to be followed. 

72.  Mr Chong does not dispute that the 1976 Memorial could be regarded as an agreement in writing of the Heads of 4 fongs but submits that the Heads of 4 fongs could not by themselves agreed to terminate or release the ancestral worship trust (if one was created in 1939, contrary to my conclusions on the first 2 issues).  Only a family meeting of the Tang family or the unanimous agreement of all members of family, says Mr Chong, could terminate an ancestral worship trust.

73.  I do not agree with Mr Chong’s submissions. As Mr Shum points out, an ancestral worship trust over the Land, even if it was created in 1939, could be dissolved or terminated by the agreement of the heads of all fongs of the family. The principle was explained by the Court of Appeal in Tang Kap Wing Tso v Tang Leuk Tso [2011] 4 HKLRD 132, (at §30) in this way:

“30.1    And with respect to Mr Wong, I do not agree with his argument that there could be no valid transfer of the shares without evidence of the unanimous consent of all members of KWT and the need for alienation.  It is clear that the requirement of unanimous consent quoted in KanFat Tatv Kan Yin Tat from the judgment of the Supreme Court in Nanjing was only a general rule which was subject to local custom being different.  So what is the custom applicable to Hong Kong?  In Re Lau Wai Chau (2000) 3 HKCFAR 98, the Court of Final Appeal held that “under Chinese law and custom, property endowed in perpetuity for the purpose of ancestral worship may be divided amongst the settlor’s male descendants if they, as the heads of all his fongs, unanimously agree to such a division”.  (Emphasis added). 

30.2     This was followed and applied by this Court (Tang V-P, Cheung JA and JohnsonLam J) in Tang Che Tai v Tang On Kwai, unrep. CACV137/2007 [2008] HKEC 143.  In para. 29 the Court held that “Lau Wai Chau is consistent with the view that consent of members could be inferred and would usually be expressed through the respective heads of their fong” - although the Court did not have to decide whether the head of a fong could “disregard actual dissent” by members of his fong.”

74.  I therefore hold that if, contrary to my conclusions on the first 2 issues, an ancestral worship trust had been created over the Land in 1939 and existed alongside the registration system under the NTO, the conditions attached to such trust were released or discharged by the unanimous agreement of the Heads of 4 fongs in 1976 when they registered the Land in their names as tenants-in-common.

75.  I now turn to the Defendant’s case on estoppel.

76.  The elements of an estoppel by convention have been analysed in Unruh v Seeberger (2007) 10 HKCFAR 31 at §§133-150 and may be summarised as follows:

(1)    the parties enter into some “transaction” or legal relationship on the basis of an assumption that was shared by or common to them both. The common assumption can be an assumed state of facts or law but its content must be sufficiently certain to enable the court to give effect to it, and must be communicated between the parties and acted upon;

(2)     an attempt by one party to depart from the common assumption which departure would be unjust because of the part taken by him in occasioning its adoption by the other party; and

(3)    the other party would suffer detriment arising out of his having entered into the relevant “transaction” on the basis of the common assumption if the opposite party were afterwards allowed to set up rights inconsistent with the assumption. For this purpose, the transaction is to be understood in the broad sense of the parties engaging in acts or omissions affecting their mutual legal relationship.

77.  The Defendant relies on the same unanimous agreement of the Heads of 4 fongs (as evidenced by the 1976 Memorial) and the representation of Tang Yuk Lam (by his conduct) to Tang Yau Shing that he would not require Tang Yau Shing to follow the wish or provision in the Division of Family relating to the Land, which was relied upon by Tang Yau Shing and the Defendant to their detriments, in that:

(1)     Tang Yau Shing agreed to and did become a tenant-in-common as to ¼ undivided share in the Land in 1976;

(2)    the Defendant purchased from Tang Chun Pang, Tak Tak On and Tang Shun Wing their ¼ share in the Land for HK$300,000 on 23 January 1997;

(3)    the Defendant purchased from Tang Tung Chiu his ¼ share in the Land for HK$100,000 on 27 January 1997; and

(4)    the Defendant has been responsible for all the expenses in relation to ancestral worship of the Deceased and his ancestors.

78.  So far as the conduct of the Heads of 4 fongs is concerned, I accept that their act in registering themselves as tenants-in-common of the Land in 1976 show that they all acted on the common assumption that the provisions of the Division of Family, if and insofar as they had the effect of creating an ancestral worship trust over the Land, should no longer be followed. This is consistent with the subsequent conduct of the Heads of 4 fongs in registering their respective ¼ undivided share in the Land in the names of their successors. 

79.  As for the conduct of Tang Yuk Lam, the Defendant asserts that since he succeeded Tang Yau Shing’s interest in the Land in 1986, he has followed the same practice of his father and collected the income generated by the Land for his own use. Neither Tang Yau Shing nor the Defendant has ever accounted for their dealings with the Land including the income generated by the Land to the members of the 2^nd, 3^rd and 4^th fongs.

80.  Initially, the 1^st Plaintiff in his witness statement (at §§10-13) asserts that his father, Tang Yuk Lam, had in the past complained about Tang Yau Shing’s act in treating most of the Commons Land and the Land as his own property and did not account for the rental received from the Land. He further asserts that despite the repeated demands made by the 2^nd, 3^rd and 4^th fongs, the Defendant & his predecessor in title failed to provide any details or account of the various property, in particular the income and expenditures of the Land from 1975 onwards.

81.  However, at trial , the 1^st Plaintiff frankly admits during examination in chief that no demand was ever made by his father on Tang Yau Shing or the Defendant in respect of the income generated by the Land:

“問：Okay，得，好喇，我哋離開呢個問題，想問一問關於你所講，99年之後就關於有交代嗰個租嘅問題，我就冇興趣講其他嘅地方，我凈係有興趣講581油燈田呢塊田嗰啲租，有冇任何時間你追討過或者係被告人交代過？

答： 冇，我冇追討過。

問： 有冇任何人追討過？

答： 冇。

問： 點解唔追討呢？

答： 聽我阿爸講，就係因為在生之前，我阿爸同我講落，阿爺話嗰啲租係佢哋收，所以就冇問。

問： 佢哋有權收嘅，佢哋認為。

答： 係。”

82.  Under cross-examination, the 1^st Plaintiff confirms that no one in the family has ever demanded the Defendant to account for the income generated by the Land and, in fact, there was no discussion whatsoever about the Land:

“問：喺整個過程之中，打官司嘅過程之中，你都應該會了解，你會明白，其中一樣嘢就係，你同埋你嘅兄弟，即係第二原告德全（譯音），同埋第二房，同埋第四房嘅子弟，有冇曾經去追被告人去交代有關581呢塊土地運用同埋收入嘅情況？

答： 冇。

問： 唔係，呢一個係一個問題，係本案其中一個問題，你哋知㗎？

答： 清楚。

問： 正因為你明白呢一個係其中一個問題，所以你喺證人口供裡面就曾經談及呢一件事嘅，有冇去追，係咪？

答： 581，我唔包括在內。

問： 唔係，唔係，你聽我問題，因為你了解呢個係一個問題，所以喺你證人口供裡面曾經談及呢個問題嘅，有冇去追，係咪？

答： 我唔同意你講法喇。

問： 你冇談過？

答： 我哋只係追其他，581就冇去講過、討論過。

問： 我唔係講緊呢個問題，我唔係真係講緊有冇，我係話因為你明白各房嘅子女有冇去追被告人有關581呢個土地，...

答： 冇。

問： ...所以你喺證人口供裡面曾經講過呢個問題嘅，你記唔記得？

答： 我要睇番。

問： 喺今日嘅供詞裡面，你斬釘截鐵咁講，係話581呢塊土地嘅問題，你係冇--你哋各房係冇追過被告人嘅，係咪？

答： 係。

問： 你剛才都係咁講吖。

答： 係。

問： 呢個講法係咁多十年來都係嘅，即係當佢哋喺76年四房去攞到呢塊土地，由嗰時開始打後，直至09年你搵律師出信，我哋講76至到09，整個過程之中，你畀法庭嘅口供係話，今日嘅口供係話，各房，二、三、四、房，都冇問佢追過嘅，啱唔啱？唔使睇文件嘅，你答我吖。

答： 啱。

問： 呢個都係我頭先你主問嘅時候嘅印象。咁你會--你記唔記得，喺你證人口供裡面曾經講過，各房嘅子孫曾經多番要求被告人去交代有關--包括埋581呢塊土地呢？你記唔記得咁講？有冇咁講過？

答： 冇咁講過。

…..

問： 其實你唔單止今日同我哋講，話各房都冇追過，從來09年之前，各房都冇追過被告人，你仲解釋埋點解冇追過，係咪？

答： 係。

問： 你畀我哋嘅解釋就係因為，你爸爸話畀你聽，呢一笪地581就係由佢哋嗰房負責收租，咁所以你哋就信咗，跟住就從來都冇追吖嘛，係咪？

答： 正常，係。”

83.  The above evidence of the 1^st Plaintiff supports the Defendant’s case that Tang Yuk Lam had by his conduct represented to Tang Yau Shing that he would not be required to follow the wish or provision in the Division of Family relating to the Land. It is also clear from the evidence of the 1^st Plaintiff that the position remained the same after the Defendant had succeeded Tang Yau Shing’s interests in the Land in 1986 until AAC’s letter dated 15 July 2009, when the Plaintiffs demanded the Defendant to account for the income and expenditure of the Land. 

84.  On the basis of the above evidence, I find that since 1976, the Heads of 4 fongs and their respective successors had acted on the common assumption that the Land would not be subject to an ancestral worship trust, and that Tang Yau Shing and his successor would be entitled to receive and use the income generated by the Land without having to account the same to the members of the 2nd, 3rd and 4th fongs.   It was only until July 2009 that the Plaintiffs required, for the first time, the Defendant to account for his dealings with the Land including the income and expenditures pertaining to the Land.

85.  The next question is whether the Plaintiffs’ departure from the common assumption would be unjust. In my view, it is clearly unjust for the Plaintiffs to depart from the common assumption, when they and their father had for 33 years acted on the same assumption as the Defendant and Tang Yau Shing and, indeed, the heads and descendants of the 2^nd fong and 4^th fong.

86.  On the question of detriment, it is self evident that if the Plaintiffs were allowed to assert rights inconsistent with the common assumption, the Defendant would suffer detriment, as it would mean that the Defendant would be required to account for his (and Tang Yau Shing’s) dealings with the Land, including all the income generated by the Land from 1976 onwards. This was despite the fact that he had already acquired the ¼ undivided share in the Land from the 2^nd fong and 4^th fong in January 1997.

87.  For the above reasons, I hold that the Plaintiffs are estopped from asserting any claim or right over the Land, to the extent that it is inconsistent with the common assumption set out in §84 above.

88.  I appreciate that the above holding is not entirely in line with the Defendant’s pleaded case of estoppel, which is confined to the provisions of the Division of Family. However, this is in part based on the 1^st Plaintiff’s evidence given at trial, which is consistent with the evidence of the Defendant.

Whether there was any duty to account to the Plaintiffs under Chinese customary law and Hong Kong law

89.  This relates to the Plaintiffs’ case as pleaded in §10 of the Statement of Claim, where it is contended that the Defendant was under a duty to account for his dealings with the Land, such duty is imposed by Chinese law and custom (which has not been particularised) as well as the fiduciary duty under Hong Kong law.

90.  In his closing submissions, Mr Chong puts his case in this way:

“Here, Ps’ case is that the Land Lot was set aside as ancestral worshipping land immediately upon the creation of the Division of Family in 1939. When the Land Lot was succeeded in 1976 under section 17, this ancestral worship trust created in respect of the Land Lot (already in full existence) was viewed in the eyes of Hong Kong law as a form of interest in land affecting the Land Lot, and since a successor cannot get a better title than the deceased, therefore the heads of the 4 fongs’ interests were subject to this ancestral worship trust. ‘Earlier equity’ simply means this ancestral worship trust in the eyes of Hong Kong law which has been fully created under Chinese law and custom. Hence, Ps have not pleaded any case of hybrid in the sense of the Court of Final Appeal in Re Lau Wai Chau.”

91.  I note that this case as formulated in the Plaintiffs’ closing submissions has never been pleaded in the Statement of Claim. Such contention only emerged during the trial when the Plaintiffs abandon their case that the Division of Family took effect upon the death of the Deceased and, instead, contend that the Division of Family took effect upon the Deceased drawing it up in 1939.

92.  However, to succeed in this case, the Plaintiffs have to overcome the first hurdle, which is to establish that an ancestral worship trust was created by the Division of Family in 1939. As I have already held that no ancestral worship trust was created by the Division of Family, there is no question of the Deceased being subject to the “earlier equity”. It is unnecessary to consider whether the Deceased and his successors including the Plaintiffs and the Defendant would be subject to such “earlier equity”.

93.  Nevertheless, Mr Shum submits that the Plaintiffs’ case, whether as pleaded in the Statement of Claim or as reformulated in the closing submissions, are misconceived as it is based on a hybrid of Chinese customary law and Hong Kong law. Mr Shum submits that similar argument based on a hybrid of Chinese customary law and Hong Kong law was rejected by the Court of Final Appeal in Re Lau Wai Chau in this way (at 106A-C):

“By the very nature of ancestral worship trusts, therefore, Chinese law and custom simply did not operate so as to create an ancestral worship trust in the present circumstances. But the appellants submit that Hong Kong law has nevertheless done so. I am unable to accept that submission.

In my judgment, our jurisprudence leaves no room for Hong Kong law to operate so as to create an instance of a Chinese law and custom institution in circumstances where Chinese law and custom itself does not so operate.  That would amount to the Hong Kong courts assembling a hybrid between Hong Kong law and Chinese law and custom, and then applying that hybrid in the name, of but contrary to, Chinese law and custom.  I can see no juridical foundation for such an exercise.”

94.  In my view, Mr Shum’s submission is right. I do not agree with Mr Chong that the Court of Final Appeal’s holding in Re Lau Wai Chau has no application to the Plaintiffs’ case. The principle stated in ReLau Wai Chau (at 103F-I) concerns with the juridical foundation of a claim based on a hybrid of Chinese customary law and Hong Kong law and is of general application.

95.  Applying the principle in Re Lau Wai Chau, I hold that the Plaintiffs’ case, as pleaded in the Statement of Claim and as reformulated in closing submissions, must fail for lack of juridical foundation. 

Duty to account as co-owner

96.  In §11 of the Statement of Claim the Plaintiffs plead an alternative case that “as one of the co-owners of the said land lot”, the Defendant was under a duty to give an account of the income and expenditure of the Land to the Plaintiffs who, as its co-owners have “rights and entitlement therein”, and to protect the Land against being used for any purpose which might affect the interest of the Plaintiffs.

97.  In his opening submissions, Mr Chong acknowledges that co-owners is not generally regarded as being a settled category of fiduciary relationship, but submits that the fact that the Plaintiffs and the Defendant, being co-owners of the Land, “coupled with the duty imposed upon [the Defendant] to manage the Land Lot for ancestral worship purpose, makes [the Defendant] a fiduciary to the beneficiaries of the Tang family including [the Plaintiffs]”. This again is a hybrid of Chinese customary law and Hong Kong law which I have already rejected as lacking proper juridical foundation.

98.  No submission is made by the Plaintiffs in support of their pleaded case that the Defendant’s right as co-owner per se is sufficient to give rise to a duty to account. .

Adverse possession

99.  The Defendant’s case on adverse possession is pleaded in §16 of the Counterclaim which, in turn, refers to and incorporates §§8 and 10 of the Amended Defence. In short, the Defendant contends that his predecessor in title (Tang Yau Shing) had and/or the Defendant himself has acquired a possessory title to the ¼ undivided share in the Land held by Tang Yuk Lam and the Plaintiffs by reason of, inter alia, the following matters:

(1)     since 1978, Tang Yau Shing had collected and received all rents from the Lot to his own use and benefit. No account was rendered to anyone;

(2)     since the death of Tang Yau Shing in 1984, the Defendant has continued to collect and receive rent from the Land for his own use and benefit and did not render any account to anyone;

(3)     since 1978, Tang Yau Shing had, and since 1984, the Defendant has “continuously and successively assumed possession and control of the Land in an open manner as if each of them was at the material times the absolute owner and let the same to tenants and received rents to his own use and benefit”;

(4)     no consent was ever obtained or payment made to the Plaintiffs or any other person for the open use and occupation of the Land by Tang Yau Shing and the Defendant;

(5)     the Defendant and his predecessor in title have successively and cumulatively had for not less than the minimum requisite limitation period (20 years) the continuous and undisturbed possession of the Land to the exclusion of the Plaintiffs and their predecessor in title and have had openly exercised acts of ownership over the same before the writ was issued. Tang Yuk Lam and the Plaintiffs have thereby been ousted from possession of the Land as co-owners of ¼ undivided share in the Land;

(6)     the title of Tang Yuk Lam and the Plaintiffs to the Land has become extinguished by virtue of s.17 of the Limitation Ordinance (Cap 347); and

(7)     the Defendant has acquired a possessory title to the Plaintiffs’ ¼ undivided share in the Land.

100.  I note that the Defendants’ pleaded case include events which took place from 1965 to 1978, which concern the acts of Tang Tung Chiu, Tang Chung Wai, Tang Yau Shing and Tang Yuk Lam.  However, at trial, the Defendant is content to rely only on the conduct of Tang Yuk Lam and Tang Yau Shing and their respective successors in title from 1978 onwards.   

101.  In the Re-Re Amended Reply and Defence to Counterclaim, the Plaintiffs deny the Defendant’s claim for adverse possession including the fact that Tang Yau Shing and the Defendant have collected and received the rent from the Land for their own use. Further, the Defendant contends that such collection and use of the rent “did not and still does not constitute exclusion of all the beneficiaries of the family trust set up by the Division of Family from the said land lot”.

102.  So far as the collection and use of the rent generated by the Land is concerned, I have already held in §§79 to 84 above that from 1978 onwards, Tang Yau Shing had collected and used all the rent and was never asked by Tang Yuk Lam (or, indeed, any members of the Tang family) to account for the rent. The same state of affairs continued after the death of Tang Yau Shing and Tang Yuk Lam until July 2009 when the Plaintiffs demanded, for the first time, the Defendant to account for the income and expenditure of the Land. In other words, there was a continuous period of about 31 years, from 1978 to 2009 (when the Plaintiffs via AAC demanded the Defendant to account) during which the Defendant (and his predecessor in title) was allowed to receive all the income generated by the Land without being required by the Plaintiffs to account for such income.

103.  This leaves 2 further issues relevant to the Defendant’s claim, namely whether as a matter of law, a co-owner can establish adverse possession against his co-owner by proving ouster and, if so, whether the fact that all the income generated by the Land has been collected and used by one co-owner to the exclusion of the other can amount to undisturbed and quiet possession for the purpose of establishing ouster.

104.  On both issues, Mr Shum relies on Doe v Prosser (1774) 1 Cowp 217 in support of his submission that as a matter of law, a co-owner can establish adverse possession against any or all of his co-owners of a land by providing ouster, and that ouster can be actual or presumed by circumstances such as uninterrupted receipt of the rents and profits of the land without account for nearly 40 years as the court held in that case.

105.  In Doe v Prosser, all 4 judges unanimously upheld the finding of the jury that by reason of the plaintiff’s uninterrupted possession of receipt of the rents and profits for 40 years without account, there was sufficient evidence to presume an actual ouster. Lord Mansfield said (at 219) as follows:

“It is a possession of near 40 years, which is more than quadruple the time given by the statute for tenants in common to bring their action of account if they think proper; namely, six years: but in this case no evidence whatsoever appears of any account demanded, or of any payment of rents and profits, or of any claim by the lessors of the plaintiff, or of any acknowledgement of the title in them, or in those under whom they would now set up a right. Therefore I am clearly of opinion, as I was at the trial, that an undisturbed and quiet possession for such a length of time is a sufficient ground for the jury to presume an actual ouster, and that they did right in so doing.”

106.  Mr Shum submits that the above principle remains applicable in Hong Kong, and was followed in Lai Wai Kuen v Wong Shau Kwong, HCA 3424/2003, 12 November 2004. Mr Chong does not dispute this.

107.  In Lai Wai Kuen, Lam J (as he then was) held that as the defendant and Madam Lai (from whom the plaintiff succeeded her title in the land) were co-owners, there has to be ouster before the possession of Madam Lai could be treated as adverse (at §7). On the evidence, there was a very long period (from 1950s to 2004) during which the defendant did not have any occupation or access to the property and did not make any demand for account. There was no payment of rent or profits to the defendant throughout the years and no acknowledgement of title. Madam Lai and her tenant had a long undisturbed and quiet possession. On the basis of such evidence, the court held that ouster can be presumed and made a declaration that the plaintiff together with her predecessor in title has been in adverse possession of the property for a period exceeding 20 years prior to the commencement of the action and has thereby acquired an indefeasible possessory title to the property (at §13).

108.  I note that the principles propounded in Doe v Prosser and Lai Wai Kuen were also described in Stephen Jourdan QC, Adverse Possession, 2^nd ed., §§29-05 to 29-09, which remain applicable in many commonwealth jurisdictions[5].

109.  Mr Shum cites the judgment of the Privy Council in Sze To Chun Keung v Kung Kwok Wai David [1997] 1 WLR 1232 in support of his submission that when there is an adverse possession, whoever receiving rents wrongfully was the squatter, and the squatter could possess the land through his licensee (at 1235D-H). 

110.  On the other hand, Mr Chong submits that to succeed in his claim for adverse possession, the Defendant has to establish both factual possession and animus possidendi, relying on Hong Kong Kam Lan Koon Limited v Realray Investment Limited, CACV 79/2008, 18 February 2009 at §§29, 31-33; Wu Yee Pak v Un Fong Leung & ors (2004) 7 HKCFAR 498 at 500D-E and Wong Tak Yue v Kung Kwok Wai & anor (No 2) (1997-98) 1 HKCFAR 55 at 69A-C.

111.  Mr Shum submits that the principles propounded in these cases, in so far as they concern factual possession, have no application to the present case, as they all concerned with the question whether physical possession of the land by the squatters were sufficient to constitute actual ouster. By contrast, where as here a co-owner is claiming adverse possession against the other co-owner, it is not necessary to prove actual ouster. I think this submission is well founded, as Doe v Prosser was a case where the plaintiff was unable to prove actual ouster or of a “tortious possession”, but the court held that there was presumed actual ouster.

112.  In light of the evidence set out in §§79-84 above, I hold that the Defendant has discharged the burden of proving presumed actual ouster against the Plaintiffs and their predecessor in title. I agree with Mr Shum that the fact that the 1^st Plaintiff did in the past visit the Land at irregular interval is irrelevant, since the presumed actual ouster is not concerned with physical eviction.

113.  As for the requisite intention to possess, Mr Chong relies on  Powell v McFarlane (1979) 38 P&CR 452 where Slade J at 472 said:

“An owner or other person with the right to possession of land will be readily assumed to have the requisite intention to possess, unless the contrary is clearly proved. This, in my judgment, is why the slightest acts done by or on behalf of an owner in possession will be found to negative discontinuance of possession. The position, however, is quite different from a case where the question is whether a trespasser has acquired possession…If [a squatter’s] acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner.”

114.  The above principle in Powell v McFarlane was applied by the Court of Appeal in Hong Kong Kam Lan Kook Limited v Realray Investment Limited, CACV 79/2008, 18 February 2009 at §32.

115.  Further, the Court of Final Appeal in Wong Tak Yue v Kung Kwok Wai & anor (No. 2) said:

“As Nourse LJ pointed out in Buckinghamshire County Council v Moran [1990] Ch 623 at p.644, adverse possession can be described as ‘possession as of wrong’ and with limitation it is the intention of the squatter that is essential.

…. As Slade J observed in Powell v McFarlane (1979) 38 P&CR 452 at pp.471-472, the intention to possess requisite for adverse possession:

…. involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the process of the law will allow.

The question of intention to possess, as with any other question of intention, is one of fact. Whether it can be established depends on an assessment of all the circumstances in a particular case.”

116.  Mr Chong submits that on the Defendant’s “own admission”, he had no intention to exclude the Plaintiffs, such admission is sufficient to negative any intention to possess on the part of the Defendant. Further, Mr Chong also relies on the Defendant’s evidence under cross-examination where he says his right to collect rental income derived from the Division of Family and that he had authority to do so by the consent of the other 3 fongs.

117.  It is not entirely clear which part of the Defendant’s evidence the Plaintiffs seek to rely on in support of the above submissions as Mr Chong has not identified the relevant evidence in his closing submissions. Nevertheless, I extract the following evidence of the Defendant which bears closest resemblance to Mr Chong’s description of his evidence:

“問： 鄧生，或者我哋清楚啲向你指出喇。根據嗰個分家冊，就你嘅爸爸在生嗰時就有權收租，就收咗租之後，就佢有責任愛嚟做祭祖，啱唔啱？

答： 啱。

問： 好喇，即使佢過咗身之後，你係佢個仔，你都當作你係有咁嘅權，亦都做同一樣嘢，啱唔啱？

答： 啱。

問： 我唔理嗰個分家冊你點樣演繹，你當作你有個權力咁做，啱唔啱？

答： 啱。

問： 好喇，於是你响581收租嗰個權力，你一直係當作個權力來源就係分家冊喇，係咪？

答： 係。

問： 啱嘛？

答： 唔。

問： 直至到而家都係？

答： 唔。

問： 好喇，咁嘅話，你有權收租，根據你嘅心態呢，就係呢個係你哋响個分家冊裡面嘅權力嚟嘅，咁樣做唔係錯嘅，啱唔啱？

答： 啱。

問： 啱嘛？直至到而家都係咁諗？

答： 唔，啱。

問： 啱呀，好喇。你咁樣做法唔係諗住我要霸佔其他啲人嘅產業㗎嘛，係咪？

答： 唔。

問： 唔係咁諗㗎嘛？

答： 係。

問： 同意吖嘛？

答：    同意[6]。”

118.  Under further cross-examination, when specific questions are asked in the context of the Defendant’s claim for adverse possession, the Defendant’s evidence is as follows:

“問： 獨有地侵佔，你從來冇講過呢件事，同意嘛？

答： 同意。

問： 你亦都冇講過話第一同埋第二原訴人係被你驅逐離開581，亦都冇咁講過，同意嘛？

答： 我唔--我聽唔明你嘅意思。

問： 你冇任何時間响你嘅訴狀或者係供詞裡面講過，第一同埋第二原告人係被驅逐出去或者唔准佢哋入呢笪地，同意嘛？

答： 同意。

問： 同意。第一同埋第二原訴人任何時間都可以進出581，亦都冇人阻止佢嘅，係咪？

答： 係。

問： 而家都係？

答： 係。

問： 以前都係？

答： 係。

問： 你亦都冇向佢表示過唔准你入581，同意嘛？

答： 同意。

問： 你唯一逆權侵佔嘅理由，根據訴狀同埋你嘅供詞就係話「我收過租」，係咪咁解？

答： 一路都係我收租。

問： 一路都係你收租，唔，我哋逐個處理。你嘅意思即係話，首先，你靜靜雞收租，而第一同埋第二原訴人唔知，但係佢哋就算响嗰度出入都好，你嘅意思就係咁就等於逆權侵佔，係咪？

答： 唔係。

問： 點至係呢？

答：    因為我收租咁耐冇人問過我要拎番啲租出嚟，同埋冇人質疑過我[7]。”

119.  As is clear from the above cross-examination, when the Defendant agrees with Mr Chong’s suggestion that he has no intention to encroach upon (霸佔) another person’s property, he is not saying that he has no intention to receive and use all the income generated by the Land without accounting to anyone – which is the basis upon which the Defendant claims presumed actual ouster against the Plaintiffs. Rather, the Defendant is simply agreeing with Mr Chong’s suggestion that his right to receive and use the income derived from the Division of Family.

120.  I do not agree with Mr Chong’s submission that the Defendant’s stated belief show that what he was doing was not “as of wrong” but rather shows that it is “as of right”. In my view, the question whether the Defendant regard the Division of Family as the source of his “right” to collect and keep the income generated by the Land without having to account to anyone is irrelevant. This is because the relevant “wrong” and the intention to “possession as of wrong”  are the Defendant’s act in receiving and using the income generated by the Land to the exclusion of the Plaintiffs (and their predecessor in title).

121.  As I have already decided that from 1976 onwards, the Land became owned by the Heads of 4 fongs, and the Plaintiffs and the Defendant have succeeded their respective ¼ undivided share in the Land from Tang Yuk Lam and Tang Yau Shing respectively, the Plaintiffs and the Defendant must be regarded as the lawful owner of their ¼ undivided share in the Land. That being the position, the Defendant’s act in receiving and using all the income generated by the Land without accounting to the Plaintiffs must be regarded as “possession as of wrong” for the purpose of adverse possession.

122.  For the above reasons, I hold that the Defendant has established the requisite intention to possess the Plaintiffs’ ¼ undivided share in the Land.

123.  It follows that the Defendant succeeds in his claim for adverse possession against the Plaintiffs in respect of their ¼ undivided share in the Land. 

CONCLUSION

124.  I dismiss the Plaintiffs’ claim against the Defendant.

125.  I hold that the Defendant is entitled to the declarations sought in prayer (a) of the Counterclaim.

126.  I give liberty to the parties to apply for any consequential orders arising from the above declarations.

127.  I make an order nisi that the Plaintiffs shall pay the costs of the action including the Counterclaim to the Defendant, to be taxed if not agreed.

128.  Lastly, I thank counsel for their very thorough submissions provided to this court.

HCA 2089/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2089 OF 2009

________________________

________________________

_________________________

REASONS FOR DECISION

_________________________

1. This action concerns a plot of land in Tuen Mun, New Territories which used to be owned by Tang Cheung Mou. The plaintiffs and the defendant are respectively members of different fongs of the Tang family. The plaintiffs commenced the present action for, among other things, an account from the defendant. The defendant resists; and counterclaims for rights over the land to the exclusion of the plaintiffs.

2. Much of the historical background of the dealings in connection with the land and the evolution of the alleged rights of the parties in the land are disputed.  For the purpose of this application, there is no need to enter into the allegations in detail.  Trial has been fixed to commence on 21 March 2013 with 5 days reserved.  For that, an expert report on Chinese law and customs has been filed by the plaintiffs pursuant to the leave of the court.  This is the application by the plaintiffs to adduce the supplemental report of the same expert.  At the end of the hearing, I gave the plaintiffs leave to do so.  As indicated, I now explain why.

3. By consent, the master gave leave to the plaintiffs to adduce expert evidence from Professor Chang Wejen of Academia Sinica, Taipei on Chinese law and customs on 30 September 2011.  In consenting to the order, the defendant made clear on the order the following stance:

(1)  The defendant makes no admission to the contents of the expert evidence to be adduced by the plaintiffs notwithstanding the defendant has no expert evidence of his own.

(2)  The defendant makes no admission that expert evidence is necessary for the disposal of the proceedings.

The order followed by setting out 10 issues on which the plaintiffs had leave to adduce expert evidence on.

4. Proceedings have since been stayed for mediation.  Mediation failed. Pursuant to further direction, the plaintiffs eventually served the expert report of Professor Chang on 13 April 2012.

5. The expert report filed proves to be inadequate for 2 reasons.  First it was dated 18 January 2010 and was therefore obtained well before the leave and direction to do so in September 2011.  Second, and not surprisingly, it does not cover all of the 10 issues set out in the direction.  It is common ground that it covers the first 4 issues so set out.

6. However, nothing has been done until, according to the plaintiffs’ solicitors, the discovery of the inadequacy of Professor Chang’s report in September 2012.  The expert was approached, who came up with the supplemental report dated 1 December 2012.  It is common ground that the supplemental report now covers most, if not all, of the remaining issues set out in the court’s direction in September 2011.

7. By summons dated 6 December 2013, the plaintiffs sought, among other things, leave to adduce the supplemental expert report.  It was heard before Deputy High Court Judge Lok at the pre-trial review on 13 December 2012.  The learned judge gave leave to the parties to file affirmations and adjourned the application for substantive argument.  Hence this hearing.

8. Essentially, this was an oversight on the part of the legal team of the plaintiffs in that they adduced the expert report prepared in advance and without regard to the whole list of issues set out by the court when leave to adduce such evidence was given.  The plaintiffs’ solicitors did not seek to deny that.  The oversight was compounded by the delay in discovering the problem.

9. As to the time taken by the expert to come up with the supplemental report once the problem was discovered, the explanation was that the expert was pre-occupied by the reconstruction of his residence which was severely damaged when Typhoon Saola hit Taiwan in August 2012.

10. Mr Chong, with Mr Tam, for the plaintiffs and Mr Shum for the defendant cited numerous authorities which helped illustrate the court’s attitude and approach to late interlocutory application that bears the consequence of jeopardising the milestone dates, trial date being one of them. It suffices for me to say that each case turns on its own circumstances.  No factor is considered in isolation.  All factors considered, the court has eventually to ensure the just resolution of the dispute between the parties.  This in my view is enshrined in both O.1A of the Rules and the authorities cited.

11. The defendant is not to blame for complaining about the late application, notwithstanding the explanation given on behalf of the plaintiffs. In opposing the application, Mr Shum suggested that the supplemental expert report also caused those instructing him to re-consider whether to adduce the defendant’s own expert evidence.  But if he sought to do that, the integrity of the timetable, in particular the trial date, would be jeopardised.  That, according to Mr Shum, became all the more relevant consideration when deciding whether to give the plaintiffs leave to adduce the supplemental report.

12. At least since the new court rules have come in place since 2009, the parties are expected to be proactive about case management.  As far as expert evidence is concerned, the parties have a duty to consider and to contemplate if expert evidence should be adduced.  If yes, an application should be made pursuant to O.38, r.36 of the Rules of the High Court.

13. The test for that is trite, namely that the expert evidence had to be relevant, necessary and of probative value in assisting the court to resolve the parties’ dispute.  In the present case, the plaintiffs initiated the consideration of expert evidence on Chinese law and customs, as that was raised specifically on pleading.  The defendant could have opposed; but decided to consent to leave.

14. It was suggested that the defendant adopted a wait and see approach.  However the qualification for the defendant’s consent as stated in the consent order in September 2011 (above) does not clearly, if indeed, reflect that.  In any event, the questions of relevance and necessity of expert evidence normally do not depend on what the expert may have to say in due course.

15. Mr Shum explained that that his client might nevertheless have to rely on expert evidence on Chinese law and customs, because the court might not accept his primary stance that such evidence is irrelevant and unnecessary.  In that case, the defendant should nevertheless have obtained leave to adduce his own expert evidence at the same time as the plaintiffs sought theirs.

16. By indicating that such expert evidence was unnecessary; and therefore would have no expert evidence of his own when consenting to the leave to the plaintiffs to adduce such evidence, the defendant has made his stance clear.  If the defendant now decides to adduce expert evidence on Chinese law and customs, he would have to apply on the basis of change of mind or circumstances.

17. Has there been change in circumstances?  I think not.  As mentioned, it is common ground that the supplemental expert report covers what should have been included in the expert report already filed.  It never seeks to go beyond the issues set out in the direction and the leave to adduce such evidence back in September 2011.  The consideration of the relevance of and necessity for such evidence in respect of those issues, which was and still in dispute, has not changed.

18. I therefore do not agree with the suggestion that the supplemental expert report sought to be adduced by the plaintiffs has brought about any change in circumstances that should cause the defendant to change his assessment of the relevance of and necessity for expert evidence in the present case.

19. In conclusion, I gave leave to the plaintiffs to adduce the supplemental expert report.  That has to happen by 15 February 2013.  I indicated that if the defendant was minded to apply now for leave to adduce expert evidence, I would hear it; but his client had to consider the above reasoning (which was discussed during the hearing) and the time frame before the trial.  Mr Shum must be acutely aware of all those; and indicated that his client would not seek to do so in this hearing.

20. The need for the supplemental expert report compounded with the late application for adducing it put the plaintiffs in rather poor light.  The fact was that the defendant was entitled to expect to deal with no more expert evidence than the expert report already filed especially after the plaintiffs have indicated readiness to set down the case for trial on such basis.  The present application was taken out some 7 months after leave to set down.  When the plaintiffs came before Deputy High Court Judge Lok for such leave, they saw fit to do so without any affidavit to explain.  The defendant’s opposition was not utterly unreasonable; and it was the indulgence of the court that the plaintiffs sought, whether the defendant strongly opposed or not.  I therefore exercised discretion to order costs of the application against the plaintiffs.