HIP HING TIMBER CO LTD v. TANG MAN KIT AND ANOTHER

FACV No. 11 of 2003

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 11 OF 2003 (CIVIL)

(ON APPEAL FROM CACV NO. 137 OF 2002)

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J U D G M E N T

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Mr Justice Bokhary PJ :

1. On 8 June 2004, after hearing the parties on the question of whether we had jurisdiction to entertain the merits of this appeal, we held that we had no such jurisdiction. This is because there is no effective judgment of the Court of Appeal from which to appeal to us since the Court of Appeal's judgment is a nullity. Accordingly we set aside the Court of Appeal's judgment. And we remitted the matter to the Court of Appeal for the appeal from Yuen J to be heard by a differently constituted Court of Appeal consisting of three members. The sole basis on which we acceded to Ms Audrey Eu SC's submission that the Court of Appeal should be differently constituted is this. All three members of the Court of Appeal hearing the matter afresh should be in the same position, namely that of coming to the matter for the first time. It is to be observed that the re-listing following our decision in Shell Hong Kong Ltd v. Yeung (2003) 6 HKCFAR 222 was before a differently constituted Court of Appeal. After announcing the setting-aside and remitter, we heard the parties on costs. We said that we would give our decision on costs when handing down our reasons for the setting-aside and remitter. We now hand down those reasons, they being those given by Lord Millett NPJ. As can be seen from the judgment given by Lord Millett NPJ for the Court, we leave the parties to bear their own costs here and below.

Lord Millett NPJ :

2. This is an action for the recovery of land. The plaintiffs (who are the respondents before us) bring the action to recover land which they allege has been unlawfully occupied by the defendant (the appellant) following the expiry of a notice to quit. The plaintiffs seek orders for possession and mesne profits from the expiry of the notice on 31 December 1986. The defendant claims to be entitled to remain in possession of the land under and by virtue of a tenancy granted by a predecessor of the plaintiffs as varied by later oral agreements which precluded the giving of the notice to quit.

3. Although the Writ was issued more than thirteen years ago, the action has progressed remarkably little. For the first eight years it seems to have been almost completely dormant. For the last five years it has become embroiled in a lamentable series of procedural tangles which have prevented the substance of the dispute from coming to trial and which threaten to continue to do so.

The procedural history

(1) The original Writ and pleadings

4. The Writ was issued in November 1990. The original plaintiff named in the Writ was "Wah Yan Mo Fan Heung" ("the Heung") "with Chan Kam Cheung and Tang Man Kit as Managers". The Statement of Claim was somewhat confused. It alleged that the Heung "was and is an unincorporated body beneficially interested in" agricultural lands in the New Territories held from the Crown under a Block Crown Lease granted in 1905. It alleged that in January 1960 one Lui Lap Ka and one Wong Tat To were registered as "the Managers (and hence legal owners as trustees for the Heung)"; and that in September 1984, following the death of Lui Lap Ka, one Wong Pui was registered in his place as "the Manager (and hence one of the legal owners and trustees for the Heung)". There was no indication as to whether and if so when Chan Kam Cheung and Tang Man Kit became Managers of the Heung.

5. The Statement of Claim acknowledged that the defendant claimed to be a yearly tenant of part of such lands ("the land") but alleged that its tenancy had been determined on 31 December 1986 by a notice to quit dated 10 April 1986 "given on behalf of the registered managers of the Heung" and served by a firm of solicitors described as "solicitors for the Heung as landlord". Despite the expiry of the notice to quit, the defendant had, it was alleged, wrongfully held over possession of the land.

6. The defendant filed a Defence and Counterclaim in January 1991. It admitted that the Heung was and at all material times had been the beneficial owner of the land; that Wong Tat To was at all material times a Manager of the Heung and the person with whom the defendant dealt; and that it was carrying on the business of a timber yard on the land. The defendant pleaded an oral agreement which it alleged was entered into in 1966 between (1) Wong Tat To "acting in his capacity as manager and trustee of the Heung" and (2) one Chong Shui Kit, who was proposing to carry on the business of a timber yard on the land under the name Hip Hing Timber Company. Under the terms of the alleged agreement Chong Shui Kit was to preserve and improve the land and pay nominal fees to the Heung, and the Heung "as the owner of" the land was to allow Chong Shui Kit to remain in occupation until the government resumed it and to receive 60% of any compensation paid by the government upon resumption.

7. The defendant alleged that, upon its incorporation in 1974, it was agreed between Chong Shui Kit on its behalf and Wong Tat To "on behalf of the Heung" that the 1966 agreement should continue in force but with the defendant substituted for Chong Shui Kit. The defendant alleged that, in reliance on the promises made by Wong Tat To it had materially altered its position by improving and laying out money in relation to the land. The defendant admitted service of the notice to quit purporting to be written "on behalf of the registered managers of the Heung", but claimed to be entitled to remain in occupation of the land pursuant to the 1966 and 1974 agreements and counterclaimed for specific performance of those agreements.

8. As the Court of Appeal observed, the defendant's pleaded case was that the Heung was the beneficial owner of the land and that the defendant was entitled to remain in possession under or by virtue of agreements made with Wong Tat To acting as manager of the Heung and on its behalf. Its claim to remain in occupation of the land was thus predicated upon Wong Tat To's position as manager of and trustee for the Heung.

9. The Heung served a Reply and Defence to Counterclaim in 1991. This challenged the validity of the 1966 agreement (if it was ever entered into, which was denied). The action then virtually went to sleep. In December 1997 the Statement of Claim was amended by pleading the deaths of Wong Pui and Wong Tat To and alleging that Chan Kam Cheung and Tang Man Kit had become the sole managers and hence the legal owners and trustees for the Heung. Chan Kam Cheung had in fact died some months previously.

10. At this stage the case largely turned on the inherent plausibility of agreements alleged to have been entered into orally in 1966 and 1974 and the credibility of the witnesses who testified to their existence.

(2) The application to strike out the original Writ

11. In March 1998, when the trial was apparently due to take place within a few months, the defendant applied by summons to have the Writ and the Amended Statement of Claim struck out and the action dismissed. The application was made (inter alia) on the ground that the plaintiff named in the Writ (i.e. the Heung) was an unincorporated body with no corporate or separate legal existence or capacity to sue or hold land. The application came before Yuen J in December 1998.

(3) The application to amend the Writ

12. At the hearing the plaintiff sought leave to amend the title of the Writ and to re-amend the Statement of Claim. The Writ was to be amended to accord with the decision of the Court of Appeal in Tang Yau Yi Tong v. Tang Mou Shau Tso [1996] 2 HKLR 212, 219 by striking out the Heung as plaintiff and substituting Tang Man Kit "suing as sole manager" of the Heung. The Statement of Claim was to be re-amended by retaining the pleading that the Heung was and is an unincorporated body but adding an allegation that it was and is a t'ong within the meaning of s.15 of the New Territories Ordinance, Cap. 97 ("the Ordinance"). The case was argued on the basis of the draft Re-Amended Statement of Claim.

13. The judge ruled that the Re-Amended Statement of Claim raised an arguable case that the Heung was a t'ong within the meaning of s.15 of the Ordinance and that Tang Man Kit was its registered manager and that this ought to go to trial. Accordingly she refused to strike out the action and gave leave to amend the Writ and re-amend the Statement of Claim.

(4) The application for the trial of preliminary issues

14. The defendant promptly took out a further summons for the trial of four preliminary issues:

(i) whether Tang Man Kit, who was now the sole named plaintiff, was the validly approved and registered manager of the Heung under s.15 of the Ordinance;

(ii) whether the Heung was a t'ong within the meaning of s.15 of the Ordinance;

(iii) whether the plaintiff had locus to bring the action; and

(iv) whether Wong Tat To and Wong Pui were the validly approved and registered managers of the Heung under s.15 of the Ordinance when the notice to quit was served.

15. The summons was heard by Yuen J in March 1999. Relying on Banco de Bilbao v. Rey [1938] 2 All ER 253, the defendant submitted that Tang Man Kit's authority to sue on behalf of the Heung (on the basis that the Heung was a t'ong) should be a matter for final determination before the trial of the action. The judge upheld this submission, but ruled that the question could not be the subject matter of a preliminary issue. She warned that, as want of authority to sue could not be raised by way of defence in the action, if the defendant was minded to raise the issue by the proper procedure it should do so without delay.

(5) The application to strike out the Amended Writ

16. The defendant promptly issued a Notice of Motion for an order that the Writ be set aside as having been issued without authority. In the meantime the title to the Writ was further amended to its present form by adding the name of Foo Tak Ching as a manager of the Heung.

17. After a hearing which lasted seven days and in which factual and expert oral evidence was taken Yuen J found that the plaintiffs had no authority to sue and dismissed the action. She ruled that three issues arose for decision:

(i) what was the meaning of "t'ong" in s.15 of the Ordinance?

(ii) what was the Heung and was it a t'ong within the meaning of s.15?

(iii) If the Heung was a t'ong within the meaning of s.15, had the plaintiffs been duly appointed managers and had their appointments been duly approved and registered so that they were authorised to bring or continue the action?

18. The plaintiffs submitted (inter alia) that they or their predecessors were the persons who had granted the tenancy to the defendant and that the defendant was estopped from denying its landlord's title.

19. The judge ruled that the burden was on defendant to show that the plaintiffs had no authority to sue. She held

(i) that commercial associations formed with a view of profit were not within the Ordinance;

(ii) that the Heung was an unincorporated association formed for the purposes of gain, and accordingly was not a t'ong within the meaning of s.15 of the Ordinance;

(iii) that the commencement and continuation of proceedings to recover land beneficially owned by a Heung was a dealing with the land which required the consent of the District Officer;

(iv) that on the evidence the appointment of the successive managers of the Heung had not been approved or registered until 1 September 2000; and that the proceedings were commenced and continued without the authority of the District Officer; and

(v) that the principle that a tenant may not deny its landlord's title had no application because the issue was not whether the plaintiffs had title to the land but whether they had authority to bring proceedings at all. They had not purported to sue in their own right but as managers of the Heung. Moreover insofar as the Heung was an unincorporated association the evidence as to the composition of the association and the validity of votes was far from clear.

20. In relation to the last point, the authority of the plaintiffs to represent the Heung was a matter of the Heung's internal administration and had nothing to do with the defendant. It was entitled to challenge their authority to represent the Heung, but its only legitimate interest in doing so was to ensure that it was not exposed to the risk of being made the subject of a second claim. It was entitled to be protected against this risk; but the proper way to protect it was not to enquire into the propriety of the plaintiffs' appointment, which was a matter between the plaintiffs and the Heung, still less to strike out the proceedings, but to make an appropriate representation order. When difficulties appeared to arise, however, this course did not occur to any one, and no such order was sought.

21. The judge accordingly dismissed the action for want of authority to sue. She did so in the light of her findings (i) that the plaintiffs were not suing in their own right but as managers of the Heung; (ii) that the Heung was not a t'ong within the meaning of s.15 of the Ordinance; and (iii) that in any event the plaintiffs had no authority to bring proceedings for the recovery of land on behalf of the Heung without the consent of the District Officer.

(6) The first hearing in the Court of Appeal

22. The plaintiffs appealed to the Court of Appeal. By their original Notice of Appeal the plaintiffs merely challenged the judge's ruling that the Heung was not a t'ong. By a Supplemental Notice, however, which was intended to replace the original Notice and which repeated and added to its contents, they raised as their first ground of appeal an alternative basis for maintaining the action, namely that they could sue to recover the land as successors of the persons who had granted the tenancy under which the defendant claimed to remain in possession and whose title the defendant could not challenge. This ground did not depend on the status of the Heung as a t'ong within the meaning of s.15 of the Ordinance.

23. The appeal came before a court consisting of only two members (Rogers VP and Le Pichon JA). At the outset of the hearing there was a brief discussion between leading counsel for the plaintiffs (the appellants in the Court of Appeal) and Rogers VP whether the court was properly constituted to hear the appeal. This depended on whether the order of Yuen J was interlocutory or final. The court did not invite substantive argument and made no formal ruling. It merely indicated that it was satisfied that the order was interlocutory and both parties were content to proceed on this basis.

24. The Court of Appeal allowed the appeal. It held

(i) that the Heung was and always had been a t'ong within the meaning of s.15 of the Ordinance;

(ii) that the taking of proceedings to recover possession of land was not a dealing with land and did not require the consent of the District Officer; and

(iii) that, irrespective of the status of the Heung, there seemed to be no reason why the plaintiffs as successors of the persons who had granted the tenancy should not be entitled to determine it and bring proceedings to recover possession of the land; but that in the light of (i) and (ii) there was no need to decide this question.

The defendant appealed to us.

(7) Our concerns

25. In April 2004 the Registrar of the Court of Final Appeal wrote to the parties by our direction and expressed our concern that the order of Yuen J may have been a final order, in which case in the absence of the prior written consent of the parties a Court of Appeal consisting of only two members would have had no jurisdiction to hear the appeal and the order appealed from would be a nullity. If this were the case then we in our turn would have no jurisdiction to hear the appeal on its merits and would have no option but to set the order of the Court of Appeal aside and reinstate the appeal from Yuen J's order.

26. The parties were invited to consider whether it might be possible to avoid the need to determine this question with the obvious risk that such a course would entail. They did not, at this stage, avail themselves of the offer. They made written submissions in which the defendant (the appellant before us) declined to challenge the jurisdiction of the Court of Appeal and the plaintiffs (who had succeeded below) naturally supported it. This did not, of course, solve the problem, since we could not avoid deciding a question on which our own jurisdiction depended.

(8) The first hearing in the Court of Final Appeal

27. The appeal came on for hearing before us on 25 May. We drew attention to s.34B(4)(c) of the High Court Ordinance, Cap. 4, which provides that the Court of Appeal shall be duly constituted even if it consists of only two members provided that all the parties consent to the appeal being heard and determined by two Justices of Appeal, but that their consent must be filed before the hearing. But for this proviso, the parties could have solved the problem by giving their retrospective consent to the composition of the court which had made the order under appeal. After a short discussion and with the consent of the parties we adjourned the case for two weeks to enable the parties to file such consents before returning to a similarly constituted Court of Appeal (Rogers VP and Le Pichon JA) and inviting it without hearing further argument to redeliver its previous judgment and again grant leave to appeal. This would enable us to hear both appeals without having to decide which of them was from an order of a properly constituted Court of Appeal, since one or other must be.

28. We did not, of course, direct the Court of Appeal to take this course, but we expressed the hope that it would do so, since it would avoid the unnecessary expenditure of time and money in investigating the question whether the Court of Appeal had jurisdiction to make its original order and the unfortunate consequences that would follow if we were to hold that it had not.

(9) The second hearing in the Court of Appeal

29. The parties duly filed written consents under s.34B(4)(c) and on 3 June applied to the Court of Appeal (Rogers VP and Le Pichon JA) to take the course which we had indicated. The Court of Appeal declined to do so. Its reasons may be summarised as follows:

(i) the Court of Final Appeal had made no finding that Yuen J's judgment was a final judgment and had not set aside the judgment of the Court of Appeal as given without jurisdiction;

(ii) that judgment having been perfected, sealed and filed and not having been set aside the Court of Appeal was functus officio and had no jurisdiction to reissue its judgment;

(iii) the Court of Final Appeal was inviting the Court of Appeal to treat Yuen J's order as a final order and its own previous judgment as made without jurisdiction without hearing argument or reaching any conclusion of its own to this effect;

(iv) neither party wished to argue that Yuen J's order was a final order or that the appeal to the Court of Appeal had been other than an interlocutory appeal which could properly be heard by a two-member Court of Appeal; and

(v) in these circumstances, no point could be taken by either party in the Court of Final Appeal that the order appealed from was made without jurisdiction.

In the light of these observations, the application was not pursued.

30. The Court of Appeal was bound to consider the propriety of the course which it was being asked to adopt, but its approach was certainly mistaken. It begged the very question at issue and was based on a misapprehension of what the Court of Appeal was being asked to do.

31. If the Court of Appeal which heard the original appeal was properly constituted then its refusal to reissue its judgment would be correct. The Court of Appeal would be functus officio and it would have no jurisdiction to make a fresh order. But the question was whether the Court of Appeal which heard the original appeal was validly constituted. If it was not, as we had indicated (without deciding) might be the case, then its original judgment was a nullity, and far from being functus officio the Court of Appeal would not even have begun to embark upon its task. By basing its reasoning on the premise that it was functus officio, the Court of Appeal assumed that it had been properly constituted when it heard the original appeal and begged the question at issue.

32. We were not inviting the Court of Appeal to assume that Yuen J's order was a final order or that its own previous judgment was given without jurisdiction, but merely to redeliver it in case they were, and so eliminate what we saw as a real risk to our own jurisdiction to hear the appeal on the merits. By taking the course proposed, the Court of Appeal could have ensured that, whether Yuen J's order was final or interlocutory, we would have a proper appeal before us. The only doubt, which would not need to be resolved, would be whether it was the first or the second judgment of the Court of Appeal which was the valid judgment from which the appeal was brought.

33. There can be no doubt that the Court of Appeal had jurisdiction, at our invitation and with the parties' consent, to reissue its judgment de bene esse and without deciding whether it was necessary to do so in order to place the jurisdictional basis of the judgment appealed from beyond question.

34. The parties were evidently persuaded to withdraw their application on the assurance of the Court of Appeal that the validity of its existing order could not be challenged by either party before us. That was not correct. An order of the Court of Appeal, if not properly constituted, is a nullity. It is, of course, a proper ground of appeal that the court from which the appeal is brought had no jurisdiction to make the order in question; but if that is found to be the case the court hearing the appeal has no jurisdiction to determine the appeal on its merits but is bound to confirm the position by setting aside the order below as a nullity.

35. The parties cannot confer on us by consent a jurisdiction which we do not possess, and since the issue goes to our own jurisdiction then, contrary to the advice given to the parties by the Court of Appeal on which they were persuaded to withdraw the application, we are bound to enquire into it whether the parties raise it or not.

36. In fact, when we resumed the hearing of the appeal on 8 June we had the benefit of full argument on the question. By then counsel for the defendant had taken fresh instructions and was able to submit that the judgment of the Court of Appeal was given without jurisdiction. This was vigorously contested by counsel for the plaintiffs, who naturally wished to support the judgment in their favour.

The jurisdiction of the Court of Appeal

37. In the exercise of its civil jurisdiction the Court of Appeal must consist of an uneven number of judges not less than three save in the circumstances specified in s.34B(4) of the High Court Ordinance. The only circumstance which was arguably present is that specified in s.34B(4)(a), which provides that a Court consisting of two Justices of Appeal shall be duly constituted to hear and determine an appeal against an interlocutory order or judgment. Accordingly the validity of the order of the Court of Appeal depends on whether Yuen J's order was an interlocutory or final order.

38. This is a notoriously difficult question and an unsatisfactory basis upon which to found the jurisdiction of an appellate court. For present purposes, however, it is sufficient to say that an order is a final order if, whatever the outcome of the application on which it is made, it is finally determinative of the entire cause or matter. An order is also regarded as a final order if, although not finally determinative of the entire cause or matter, it is finally determinative of a crucial or substantial issue in the cause or matter: see Shell Hong Kong Ltd v. Yeung Wai Man Kiu Yip Co. Ltd (2003) 6 HKCFAR 222 and the cases there cited.

39. Yuen J plainly considered that she was making a final order. This was because she was being asked to strike the action out for want of authority to sue, and on the authority of Banco de Bilbao v. Rey (supra) she thought that this could not be raised as a defence in the action or at the trial but must be made the subject of a final determination in a separate application brought for the purpose. This was why she declined to make it the subject of a preliminary issue.

40. In this, with respect, the judge was wrong. As Rogers VP observed in his original judgment, the line of cases of which the Banco de Bilbao case is an example is concerned with the question whether the lawyers who have to commence or to continue the action have done so with the authority of the party in whose name it has been brought. If not it may be struck out on the application of either party, for a person is not to be at risk as to costs of an action which has been brought by lawyers acting for a third party without his authority: see Richmond v. Branson & Son [1914] 1 Ch 968. In all the cases on this question the plaintiff named in the Writ was an entity which, for one reason or another, had no capacity to sue or to authorise proceedings to be brought in its name.

41. Once the original Writ had been amended this issue was no longer capable of arising and was not the subject of the application to the judge. The plaintiffs named in the Amended Writ were two individuals who were suing in their own names. The judge was concerned with a different question: whether the plaintiffs had authority to sue on behalf of the Heung. She dismissed the action because they were not suing in their own right and had no authority to sue on behalf of the Heung. But this did not go to their authority to bring the proceedings in their own names, which was beyond dispute, but to the question whether they were the persons in whom the cause of action was vested.

42. This issue ought to have been but was not raised by the Defence, which as Rogers VP pointed out, proceeded on the basis that the Heung was the beneficial owner of the land; that at the material time Wong Tat To was its manager and trustee; that he had entered into the relevant agreements on behalf of the Heung on which the defendant relied the relevant time; and that the Heung was bound by those agreements or estopped from recovering possession.

43. There was thus no pleaded issue as to the questions of fact and law which the judge decided. But this is past history. Those questions went to the existence of the plaintiffs' cause of action, and if pleaded could have been made the subject of a preliminary issue (as the defendant tried to do) or left to the trial. In either case, and whichever way the issue was decided, it would be finally determinative of the entire action or of a crucial issue in the action. It is difficult to conceive of an issue which is more crucial to the success or failure of an action than the right of the plaintiffs to bring it.

44. It is true that the practice in England has been to treat an application to strike out the plaintiff's Statement of Claim as disclosing no reasonable cause of action as an interlocutory application: see Re Page [1910] 1 Ch 489; Hunt v. Allied Bakeries Ltd [1956] 3 All ER 513; but this must be on the footing that the issue is concerned with the sufficiency of the pleadings so that the defect may be curable by amendment. In the present case there was no doubt that the Amended Statement of Claim disclosed a cause of action; the question was whether it was vested in the plaintiffs.

45. It follows that, insofar as the judge decided that the plaintiffs had no cause of action in the only capacity in which they brought it, her decision was final and the two-member Court of Appeal had no jurisdiction to hear and determine the issues raised by the original Notice of Appeal. It follows that we have no jurisdiction to entertain the defendant's appeal on the merits from this part of the judgment of the Court of Appeal.

46. That is not quite an end of the matter. By their Supplemental Notice of Appeal the plaintiffs raised an alternative basis for maintaining the action. The contention had been briefly noted by the judge, who rejected it by saying that the plaintiffs were not suing in their own right but as managers of the Heung. The Court of Appeal considered it, for Rogers VP noted it and thought that it appeared to be a good one though one which it was unnecessary to decide.

47. We think that this part of the judge's decision may have been interlocutory, for it was based on the state of the pleadings and could be cured if necessary by amendment. In view of the lax way in which the defendant had been allowed to depart from and even contradict its own pleadings, it would hardly have been open to it to object to any amendment to the Statement of Claim which might be necessary to permit the point to be taken.

48. Even so, we do not think that this takes the matter any further. All that the judge can be taken to have decided on an interlocutory basis was that in the current state of the pleadings the alternative way of putting their case was not open to the plaintiffs. She did not decide that, if the pleadings were further amended to allow the point to be taken, the plaintiffs would still have no cause of action; and had she done so, her decision would have been final in this respect also. In our opinion, therefore, the Court of Appeal had no jurisdiction to do more than it did by saying, in effect, that the plaintiffs would have an arguable case that they were entitled to bring the action as successors of the persons who had granted the tenancy and whose right to do so the defendant could not challenge without giving up possession. In any event, counsel for the plaintiffs was not willing to abandon the contention that the Heung was a t'ong within s.15 of the Ordinance, and wished to reargue it before a properly constituted Court of Appeal if necessary.

Conclusion

49. It is a great pity that the Court of Appeal adopted the approach it did, with the waste of time and costs which has resulted. In the circumstances, however, we set aside the judgment of the Court of Appeal as given without jurisdiction. The consequence will be to reinstate the original appeal, which has not yet been determined by a properly constituted court. We think that it would be desirable that the appeal be heard before a differently constituted Court of Appeal consisting of three members, and we so order.

50. We consider that the fairest order for costs is to direct that each party should bear its own. In all the circumstances we do not think it appropriate to distinguish between the costs in this Court and the costs of the two abortive proceedings before the Court of Appeal, and our order applies to all three sets of proceedings.