KWAN HUNG SHING, as executor of the estate of HO SHUK MING, deceased v. FONG KWOK SHAN, CHRISTINE AND OTHERS

CACV 358/2019, [2023] HKCA 1020

On appeal from [2019] HKCFI 1687

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 358 OF 2019

(ON APPEAL FROM HCA NO. 265 of 2012)

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JUDGMENT

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Hon Chu VP:

A.  Introduction

1.  After a trial that lasted ten days, Wilson Chan J (“the Judge”) handed down his judgment on 9 July 2019, which (1) allowed the plaintiff’s claim against the 1^st to 20^th defendants; (2) dismissed the plaintiff’s claim against the 21^st defendant; and (3) dismissed the 1^st and 15^th defendants’ counterclaim against the plaintiff.  The Judge also ordered the 1^st to 20^th defendants to pay the plaintiff’s costs of the action and the plaintiff to pay the 21^st defendant’s costs of the action.  

2.  This is the 1^st defendant’s appeal against the dismissal of her counterclaim.  There is no appeal from the 15^th defendant.

3.  As a result of the General Adjournment Period in March 2022 due to the public health situation, the hearing of this appeal was vacated.  With the agreement of the parties, this appeal is dealt with on paper without an oral hearing pursuant to Order 59 rule 2A(5)(a) of the Rules of the High Court Cap. 4A.  

B.  The background

4.  The action in the court below arose out of a development scheme to build small houses in Sai Kung, New Territories under the Small House Policy (“SHP”).  The land plots involved in the project (collectively “the Properties”) are located within Demarcation District No. 252, and comprise (1) Lot 104, which was divided into Sections A to H and the Remaining Portion in 1994 (see §10(2) below), and (2) Lot 391 and Lot 396, which were exchanged for Lots 104F and 104A in 1998 and 2005 respectively (see §15 below).

B.1  The parties

5.  Before 4 April 1995, Madam Ho Shuk Ming (“the Deceased”) was the legal and beneficial owner of Lot 104.  She passed away before the trial of the action.  The plaintiff is the executor of her estate.  In this judgment, references to the plaintiff include the Deceased and her estate.

6.  The 1^st defendant was a shareholder and director of Kennis Ltd which traded as Green House Property Agency (“Green House”).  Green House ceased operation in about 1997 and was dissolved in 1999. The 1^st defendant is also a shareholder and director of the 15^th defendant.   Green House, the 1^st and 15^th defendants were the developers in the development scheme.

7.  Each of the 2^nd to 14^th and 16^th to 20^th defendants (collectively “the Ding defendants”) is a male indigenous villager (“Ding”) of the Sai Kung District, and is eligible under the SHP to apply to the Director of Lands for permission to build a small house in the New Territories.  

8.  The Secretary for Justice (the 21^st defendant) was joined for the purpose of obtaining relief against the government.  For the reasons given at §§53 to 66 of the judgment, the Judge dismissed this part of the plaintiff’s claim.  It is not necessary to refer to the issues between the plaintiff and the 21^st defendant and the Judge’s decision on them as this appeal is not concerned with them.

B.2  The SHP

9.  The SHP has been implemented by the government since 1972.  The policy and the procedure for an application for a building licence to build a small house as summarised by the 21^st defendant, and accepted by the Judge[1], are as follows:

“16.  Under the Policy, an adult male indigenous village (colloquially called a “ding”) of a recognized village in the New Territories (“NT”) may apply to the Director of Lands (the “Director”) for permission to erect a small house in the NT in accordance with the provisions of the Buildings Ordinance (Application to the New Territories) Ordinance, Cap 121. The Policy aims at preserving the cohesion of the indigenous communities of villages in the NT, and also at improving the housing and sanitary standards in the rural areas of NT, and is concessionary in nature. For instance, small houses may be built on agricultural lands (which otherwise cannot be used for residential purposes), and are exempted from certain requirements under the Buildings Ordinance, Cap 123 and its subsidiary legislations. On the other hand, the Policy also imposes constraints on the small houses, such as their design and construction, and mode of alienation.

17.  For a ding who already owns a suitable piece of agricultural land, he has to apply to the Director for a building licence to build a small house. The procedure may be generally described as follows: -

(1)  An applicant is required to fill in a standard application form, which includes a statutory declaration form, and submits it to the District Lands Officer (“DLO”) concerned;

(2)  The statutory declaration form has undergone changes over the years. As far as the present case is concerned, three versions are relevant:

(a)  The February/May 1993 version[2] (in force until October 1997);

(b)  The October 1997 version (in force until June 2021); and

(c)  The October 2004 version (in force until July 2006);

(3)  If the application is approved, an offer letter will be issued to the applicant with a demand note for the payment of fees;

(4)  After the payment of the fees, a building licence will be prepared and executed by the applicant and the DLO concerned;

(5)  Thereafter, the applicant will apply from the DLO concerned certificates of exemption in relation to the necessary building works, site formation works and drainage works;

(6)  Construction works may be carried out after the requisite certificates of exemption are issued;

(7)  Where construction involves neighbouring Government land (for example, the applicant may have to enter the neighbouring Government land to carry out site formation or drainage works), a “permission letter” would be issued to permit the applicant to do so; and

(8)  After completion of construction works, the DLO concerned will inspect the small house to ensure that all terms and conditions of the building licence are fulfilled, thereupon a certificate of compliance will be issued which entitles the applicant to move in and reside in the house.

18.  Sometimes, if the land owned by the applicant is not entirely suitable (for example, because it is of an irregular shape), he may undergo a land exchange with the Government – he will surrender his piece of land and the Government will issue a new grant to him. The new and former pieces of land largely overlap, but the land under the new grant will have a better shape.”

B.3       The development scheme

10.  The development scheme involves a series of agreements that the Deceased entered into with initially Green House and later the 1^st defendant.  These agreements and the events leading to them may be summarised as follows:

(1)  By a Chinese agreement (丁屋合作發展協約) dated 29 January 1995 (“1995 Agreement”), the Deceased and Green House agreed to jointly develop small houses on Lot 104.  The material terms include the following:

(1.1)  The Deceased would transfer the legal title of her land to the Dings specified by Green House to enable them to make applications under the SHP for licences to build small houses on the land (clause 4);

(1.2)  Green House would be responsible for paying the Dings (i.e. Ding fees), building costs and land premium (clause 5); and

(1.3)  The Deceased would be allocated two of the small houses to be chosen by her, and the remaining small houses would belong to Green House (clause 8).

(2)  By a deed poll dated 4 April 1995, Lot 104 was divided into nine sections, being Sections A to H and the Remaining Portion of Lot 104.

(3)  In November 1997, the rights and liabilities of Green House under the development project of Lot 104 were assigned to the 1^st defendant.  This led to: (a) a Chinese agreement (丁屋合作發展協約) between the Deceased and the 1^st defendant dated 19 February 2000 (“2000 Agreement”) for the joint development of small houses; and (b) another Chinese agreement (揀樓協約) between the Deceased and the 1^st defendant also dated 19 February 2000, which specified that the Deceased’s two houses would be built on Lots 104B and 104C.  

(4)  In 2002, the Deceased commenced DCCJ 8027 of 2002 against the 1^st defendant claiming for compensation occasioned by the 1^st defendant’s failure to complete the construction of the small houses in accordance with the 2000 Agreement.  The action was settled, resulting in the execution of an agreement dated 28 January 2004 between the Deceased and the 1^st defendant (“2004 Agreement”). Under this agreement, it was agreed, inter alia, that:

(4.1)  The 1^st defendant shall (a) obtain approval from the Buildings Department for site formation work or certificate of exemption of site formation work by 1 August 2004; (b) complete the site formation work in accordance with the approved plan and provide to the Deceased a statement of completion of work from an authorised/qualified person by 1 May 2005; and (c) complete the construction work of the small houses on Lots 104B and 104C to the standards required for the issue of Certificate of Compliance and provide the proof to the Deceased by 1 May 2006 (clauses 3.1 to 3.3);  

(4.2)  In the event of breach of any of the conditions in clause 3, the Deceased would be entitled to withdraw HK$20,000 per month from the surety money held by the plaintiff’s then solicitors (clause 5); and

(4.3) Upon the surety money being exhausted, (a) the 2000 Agreement shall automatically terminate; (b) the 1^st defendant shall reinstate the Properties to their original state and return them to the Deceased; and (c) the 1^st defendant shall procure the Ding defendants to, within three months, transfer the legal title back to the Deceased and pay the costs incurred (clause 6).  

11.  Between 1995 and 2007, Green House and the 15^th defendant had entered into various agreements and deeds with the Ding defendants, under which the Ding defendants would: (1) apply to the Director of Lands for permission under the SHP to build small houses on the Properties; (2) hold their respective section or lot of the Properties as trustees for Green House or the 15^th defendant; and (3) be paid a fee in return.

12.  Additionally, each of the 3^rd, 7^th, 9^th, 11^th, 13^th, and 18^th to 20^th defendants had executed a will appointing the 15^th defendant as the executor and devising to the 15^th defendant his interest in the Properties.  Further, each of the 3^rd, 5^th, 7^th, 9^th, 11^th, 13^th, and 18^th to 20^th defendants had executed a power of attorney appointing the 1^st defendant as his attorney to handle his small house application.

13.  Subsequent to the division of Lot 104 in 1995, the Deceased entered into various sale and purchase agreements and assignments with each of the Ding defendants in respect of Sections A to H and the Remaining Portion of Lot 104.  

14.  In consequence, the Deceased ceased to be the registered owner of Lot 104 whereas the Ding defendants became the registered owners of the Properties.

15.  In 1998, the 13^th defendant surrendered Lot 104F to the government to exchange for Lot 391.  Similarly, in 2005, the 3^rd defendant surrendered Lot 104A to exchange for Lot 396.

B4.  Construction of the small houses

16.  The construction of the two small houses allocated to the Deceased (i.e. on Lots 104B and 104C) was completed in 2008, but no certificate of compliance was issued for them which means they could not be lawfully occupied for residential purposes.  However, in 2014, it was discovered that the 1^st defendant had without the Deceased’s authority let out the two houses.  

17.  As to the other small houses, the 1^st defendant was unable to complete their construction within the time stipulated under the 2004 Agreement.  As a result, the Deceased started to withdraw a monthly sum of HK$20,000 from the surety money held by her then solicitors.  By November 2005, the surety money was exhausted.

18.  By a letter dated 29 November 2005, the Deceased through her solicitors demanded the 1^st defendant to deliver up vacant possession of the Properties.  Despite that and subsequent demands, the 1^st defendant remained in possession of the Properties.  The Ding defendants also continued to hold onto their title as the registered owner of their respective section or lot of the Properties.

19.  On 26 October 2007, the Deceased commenced DCCJ 4739 of 2007 against the 1^st to 20^th defendants, which was subsequently transferred to the Court of First instance to become the action below (i.e. HCA 265 of 2012).  

C. The parties’ cases

C.1   The plaintiff’s case against the 1^st to 20^th defendants

20.  In summary, the plaintiff’s case at trial[3] is that:

(1)  The 1995, 2000 and 2004 Agreements are illegal.

(2)  The sale and purchase agreements and assignments entered into with the Ding defendants are sham transactions in furtherance of the illegal scheme under the 1995, 2000 and 2004 Agreements.

(3)  The Ding defendants held their interests in the Properties on resulting trust for the plaintiff.

(4)  The legal and beneficial interest in the Properties remain vested in the plaintiff.

21.  The plaintiff claims the following relief:

(1)  As against the 1^st defendant[4], (a) declarations that the 1995, 2000 and 2004 Agreements are void and liable to be set aside; and (b) mesne profits or damages for trespass.

(2)  As against the 2^nd to 20^th defendants[5], (a) declarations that the sale and purchase agreements and assignments that they had entered into with the plaintiff are void and liable to be set aside; (b) orders that they convey and deliver up vacant possession of the Properties to the plaintiff; and (c) orders compelling them to remove all chattels, erections, fixtures and buildings on the Properties and restraining them from trespassing on the Properties.

C2.  The 1^st defendant’s defence

22.  The 1^st defendant did not dispute that she had remained in possession of the Properties after November 2005, but denied that it was wrongful[6]. She argued that the plaintiff was estopped from claiming loss occasioned by her possession of the Properties because she has acted to her detriment in reliance on the plaintiff’s representations and encouragement to proceed with the construction of the small houses[7].

C3.  The counterclaim

23.  The 1^st and 15^th defendants counterclaimed against the plaintiff for unjust enrichment, in the event that the plaintiff succeeded in recovering the Properties on the ground of illegality.  Paragraphs 47 and 48 of the 1^st defendant’s Re-Re-Amended Defence and Counterclaim plead that:

“47. If, which is denied, the Plaintiff’s claim to recover the Land succeeds on the basis of illegality, the Plaintiff being a party with knowledge of the illegality would be unjustly enriched at the 1^st and 15^th Defendants’ expense to the extent of the increased value of the Land after site formation works, and the value of the Plaintiff’s Houses.

48. The 1^st and 15^th Defendants aver that the Plaintiff is liable to reimburse the 1^st and 15^th Defendants for her unjust enrichment as aforesaid, or to such extent as this Honourable Court deems just.” (emphasis added)

24.  It is the 1^st defendant’s case that the value of the Properties had increased by reason of the substantial investment she and the 15^th defendant had made on the land.  It was claimed that their investment and expenditure, which totalled HK$11,912,838.50, should be taken as the “increased value” of the Properties.  The only relief sought by the 1^st and 15^th defendants in the counterclaim is[8]:

“The increased value of the Land after site formation works, and the value of the Plaintiff’s Houses.”

25.  The plaintiff disputed the counterclaim on two bases[9]:

(1)  The expenditure or investment asserted by the 1^st and 15^th defendants (if any) was incurred in the implementation of the illegal development scheme, and the court would not assist them to enforce the illegal scheme, relying on Tinsley v Milligan [1994] 1 AC 340 and Chan Yau v Chan Calvin [2014] 5 HKLRD 304. 

(2)  There was no evidence to show and support the increased value of the Properties and the value of the two small houses as asserted by the 1^st defendant.

D.  The Judge’s decision

26.  At the trial, the 1^st defendant was unrepresented while the 2^nd to 20^th defendants were absent.  The Judge identified seven issues for determination as follows (respectively “Issue 1” to “Issue 7”):

(1)  Whether the 1995, 2000 and 2004 Agreements (collectively “the Development Agreements”) were illegal and liable to be set aside;

(2)  Whether the sale and purchase agreements between the Deceased and the Ding defendants were sham transactions and liable to be set aside;

(3)  Whether the 2^nd to 20^th defendants held the Properties on resulting trust for the plaintiff;

(4)  Whether the 1^st defendant had been in wrongful possession of the Properties and thus liable in trespass to the plaintiff;

(5)  Whether the plaintiff is estopped from claiming any loss arising from the 1^st defendant’s possession of the Properties;

(6)  If the 1^st defendant is liable to the plaintiff in trespass, how should mesne profits be assessed; and

(7)  Whether the plaintiff is liable on the counterclaim for unjust enrichment. 

27.  On the illegality issue (i.e. Issues 1 and 2)[10], the Judge held that it is indisputable that the implementation of the development scheme necessarily involved the Ding defendants making false declarations and misrepresentations to the Director of Lands in their applications for building licence, and the statutory declarations made or to be made by the Ding defendants must be false. The falsity lay in the fact that:

(1)  Each of the 2^nd to 14^th, 16^th and 17^th defendants would be required to declare or had declared in the statutory declaration that he was the “sole owner (唯一業權人)”, which as a matter of law means both the legal and beneficial owner of the land[11], when in fact he never intended to be the unqualified sole owner and had further expressly agreed with Green House or the 15^th defendant that Green House or the 15^th defendant was the true owner and he only held the land on trust for either of them, and he was never the beneficial owner and was a mere trustee for the plaintiff. 

(2)  Additionally, in the case of the 3^rd, 5^th, 7^th, 9^th, 11^th and 13^th defendants, at the time they made their statutory declarations, they were neither the legal nor beneficial owner of any land because they had yet to enter into an assignment for assigning land in the Properties to them. 

(3)  In the case of the 18^th to 20^th defendants, they had made two statutory declarations.  In the first one made on 3 April 2001, each of them declared that he was the “sole owner (唯一業權人)” of the land and he “[has] never made and [has] no intention at present to make any private arrangements for [his] rights under the Small House Policy to be sold to other individual/ a developer”.  In the second one made in April 2006, each of them declared that he was the “sole legal and registered owner (唯一合法註冊業權人)” of the land, he “[has] never made and [has] no intention at present to make any private arrangements for [his] rights under the Small House Policy to be sold to other individual/ a developer”, and he ‘[has] never entered into any arrangement or agreement with any person or persons to transfer, alienate, dispose or otherwise deal with my rights in and over the Lot including but not limited to the right to develop the Lot pursuant to any grant or approval issued by the Government”.  However, on the same day they made their first statutory declarations, they also entered into agreements with the 15^th defendant (see §11 above) which show that they never intended to be the unqualified sole owner of the land as they agreed with the 15^th defendant that they were mere trustees with all the interests being owned by the 15^th defendant. Further, they were never the beneficial owners as they held the land on trust for the plaintiff. 

28.  Applying the legal principles established in the line of Hong Kong authorities[12]  which applied Tinsley v Milligan [1994] 1 AC 340, the Judge concluded that the Development Agreements and the development scheme were illegal and liable to be set aside, and that the plaintiff is entitled to declarations that the Development Agreements as well as the sale and purchase agreements made with the Ding defendants were void and liable to be set aside.

29.  On the trust issue (i.e. Issue 3)[13], the Judge held that: (1) as the 1^st and 15^th defendants had admitted that the Deceased did not receive any consideration for assigning the title in her land, this gave rise to the presumption of resulting trust; (2) consequently, despite the assignments, the beneficial interest in the Properties (including Lots 391 and 396 which were exchanged for Lots 104F and 104A) remained vested in the plaintiff; and (3) the 1^st to 20^th defendants could not dispute the existence of the resulting trust by relying on the illegal development scheme.  

30.  As for the plaintiff’s claim in trespass and the defence of estoppel (i.e. Issues 4 and 5)[14], the Judge held that: (1) the plaintiff had by letter dated 29 November 2005 demanded the 1^st defendant to deliver up vacant possession; (2) admittedly the 1^st defendant has remained in possession of the Properties; and (3) as the beneficial interest in the Properties remained vested in the plaintiff by the operation of resulting trust, the plaintiff’s title in the Properties, and in turn the trespass claim, is not tainted with illegality: Tinsley v Milligan at 374D-E and 476C-F and Kan Wai Chung & Ors v Hau Win Fai & Ors at §§7.3 to 7.7.  

31.  On the defence of estoppel, the Judge rejected the 1^st defendant’s evidence and found as a fact that: (1) neither the Deceased nor the plaintiff was aware that the development scheme involved the Ding defendants making false declarations to the Director of Lands; and (2) the plaintiff did not make any promise not to recover the Properties nor had encouraged the 1^st defendant to proceed with the construction work or to incur expenses in relation to the Properties.  

32.  The Judge held that the 1^st defendant had failed to prove on the evidence that the plaintiff had made any clear and unequivocal promise that he would not seek the return of the Properties.  

33.  The Judge accordingly rejected the defence of estoppel and held that the 1^st defendant had been in wrongful possession of the Properties, including the two houses built on Lots 104B and 104C, and the plaintiff is entitled to claim mesne profits as from November 2005.

34.  As to the amount of mesne profits (i.e. Issue 6), the Judge accepted the undisputed expert evidence of the plaintiff’s surveyor on the rental value of those lots on which no small houses had been built.  In the case of Lots 104B and 104C, the Judge assessed their rental value without regard to the two houses built on them (for which no certificate of compliance had been issued), as he was of the view that “otherwise it would put the plaintiff in the position as if the illegal contract had been carried out”[15]. The Judge assessed the total mesne profit to be paid by the 1^st and 15^th defendants to the plaintiff in the sum of HK$823,530[16].

35.  Finally, on Issue 7 which concerns the counterclaim for unjust enrichment, the Judge dismissed it for the reasons he gave at §§50-52 of the Judgment as follows:

“50. First, applying Tinsley v Milligan (supra), the court will not assist to enforce any illegal scheme or agreements of claim if the claimant has to plead or lead evidence on the illegality. Further in Chan Yau v Chan Calvin (supra), the court disallowed a restitution claim for money paid by the developer to the ding and to third parties in the implementation of the illegal scheme. Likewise, in the present case, the 1^st and 15^th defendants’ expenses, if any, were incurred in the implementation of the illegal scheme under the illegal Development Agreements and hence the court would not grant any relief in relation thereof.

51. Further or alternatively, there is no evidence at all, expert or otherwise, on the pleaded particulars of the “unjust enrichment”, namely (1) the increased value of the Properties after the site formation works; and (2) the value of the 2 small houses. The burden is on the 1^st defendant/ 15^th defendant to prove the alleged “values”. The alleged expenditure incurred by the 1^st and 15^th defendants does not necessarily equate with any increased value of the Properties. The court cannot speculate on matters such as market value. Thus, the total absence of such evidence is fatal to the 1^st and 15^th defendants’ counterclaim in any event.

52. Further still, there is no satisfactory evidence on the items of expenses stated in the table compiled by the 1st and 15^th defendants. There is no evidence as to when, who, how and why the table was prepared. The 1^st and 15^th defendants have only produced very limited receipts to prove expenses. In the premises, even if expenses are recoverable, there is no credible evidence to prove such total expenses.”

36.  Accordingly, the Judge entered judgment for the plaintiff for the declaratory and injunctive relief claimed against the 1^st to 20^th defendants and also mesne profits against the 1^st defendant in the sum of HK$823,530 together with interest, and dismissed the 1^st and 15^th defendants’ counterclaim. 

E.  The 1^st defendant’s grounds of appeal

37.  The present appeal is brought by the 1^st defendant on her own behalf.  There is no appeal from any of the Ding defendants or the 15^th defendant.  We will accordingly disregard those parts of the 1^st defendant’s submissions that seek to make representations or claim relief on behalf of the 15^th defendant, which is not a party to the appeal (see §§38 and 39   below).  

38.  The 1^st defendant issued the Notice of Appeal and filed two Supplemental Notices of Appeal while acting in person.  She has since instructed solicitors and counsel, who had re-formulated the grounds of the appeal and indicated that they would only argue the issues set out in the first written submission[17].  In summary, her appeal, which is directed solely at the Judge’s dismissal of the counterclaim, raises two broad grounds as follows:

(1)  The Judge erred in law in dismissing the counterclaim and also erred in holding that the counterclaim based on unjust enrichment was tantamount to enforcing the illegal agreements.[18] (“Ground 1”)

(2)  The Judge erred in (a) holding there was no evidence to support the counterclaim for the 1^st and 15^th defendants’ investment in the Properties in that the table they prepared for the trial did not amount to supporting evidence and there was no valuation of the increase in the value of the Properties as a result of their investment; and (b) not taking into account the 1^st and 15^th defendants’ investment or the increase in the value of the Properties in reducing or satisfying the plaintiff’s claim for mesne profit. [19] (“Ground 2”)

39.  The 1^st defendant seeks the following relief in this appeal[20]:

(1)  An order setting aside the order for dismissal of the counterclaim for unjust enrichment.

(2)  A finding in favour of the 1^st and 15^th defendants[21] that the value of the Properties has been increased to the extent of the value of the investment made by the 1^st and 15^th defendants in the amount of HK$11,912,838.50.  

(3)  An order that the mesne profits awarded to the plaintiff be set off against the amount of the investment made by the 1^st and 15^th defendants, and to award to the 1^st and 15^th defendants the difference in the sum of HK$11,089,308.50 (i.e. HK$11,912,838.50 - HK$823,530).

F.  Reasons for decision

F.1  Ground 1: The parties’ arguments

40.  Under Ground 1, the principal arguments advanced by Mr Chong, together with Mr Tsang for the 1^st defendant, are that:  

(1)  Illegality is irrelevant to the 1^st defendant’s unjust enrichment claim.  The 1^st defendant does not rely on the illegal agreements as she is not seeking to claim her contractual entitlement.  Her claim for unjust enrichment is for the increase in the value of the plaintiff’s land brought about by her investment “in money and money’s worth”, turning it into land capable of being developed and built upon and with the completion of two houses on two of the lots.[22]  

(2)  Chan Yau v Chan Calvin is irrelevant as the basis of the claim in the two cases is different.  In Chan Yau, the plaintiff sought to recover money paid to the defendant and third parties in the implementation of the illegal agreement, whereas in the present case the Judge was asked to consider the effect of the 1^st defendant’s investment on the plaintiff’s land.[23]

(3)  The plaintiff has been enriched at the expense of the 1^st and the 15^th defendants because of the investment and improvement they made to the Properties.  The enrichment is unjust because of the unenforceability of the illegal agreements which leave the 1^st and 15^th defendants with no redress for their investment other than a claim in unjust enrichment.[24]  

(4)  The finding that the plaintiff is entitled to mesne profits automatically gives rise to an inherent legal requirement to consider whether the 1^st defendant had made any improvement to the Properties, and the rental value should be assessed on the unimproved value: McGregor on Damages (21^st edition), §39-049.[25] 

(5)  As an alternative argument to (4), the counterclaim is not tainted with illegality because: (a) Chan Yau v Calvin Chan is distinguishable; (b) Patel v Mirza [2016] UKSC 42, [2017] AC 647 at §§34, 43, 171 and 204 has established new principles of law and that an unjust enrichment claim may be allowed as it unwinds the transaction by repayment of money paid and restores the parties to their original position; (c) it was held in Chung Tin Pui, as Manager of Chung Man Yiu Tso v. Li Pak Sau and Ors (unreported) HCA 568/2007, 10 August 2017, at §53 that the formal test in Tinsley v Milligan no longer applied and a claim in unjust enrichment should not be refused merely because the underlying agreement is illegal; and (d) even before Patel v Mirza, in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 688-689 the House of Lords allowed a restitution claim as it would reverse the effect of the contract rather than enforce the contract.[26]

41.  In response, Mr Shum, together with Mr Tai for the plaintiff, submit that:

(1)  Contrary to the 1^st defendant’s argument, the Judge did not hold that the counterclaim was tantamount to enforcing the illegal agreements.  Neither did the Judge dismiss the counterclaim on that basis.  What the Judge held is that the expenses incurred by the 1^st defendant, if any, were incurred in the course of carrying out the illegal scheme and the illegal agreements.  Applying Tinsley v Milligan and Chan Yau v Chan Calvin, the Court would not grant any relief of unjust enrichment since in pursing her counterclaim, the 1^st defendant had to pray in aid the illegal agreements.[27]

(2)  There is no real distinction between the facts in Chan Yau v Chan Calvin and the present case. There is also no genuine distinction between seeking recovery of expenses incurred under an illegal scheme and claiming the increased value of the land which is represented by the amount of expenses incurred under the illegal scheme.[28]

(3)  Chung Tin Pui does not support the 1^st defendant’s case.  It involves an interlocutory application to amend pleadings and the decision proceeds on the basis that because Tinsley v Milligan was overruled in the UK by Patel v Mirza the reliance rule no longer applied, without regard to or discussion of the Court of Final Appeal’s decision in HKSAR v Lau Kam Ying and the Court of Appeal’s decision in Kan Wai Chung & Ors v Hau Wun Fai & Ors.[29]  

F.2  Ground 1: Discussion

42.  The primary argument of the 1^st defendant under this ground is that the Judge misapplied the law on unjust enrichment and that illegality is irrelevant to the counterclaim as she is not seeking to enforce her contractual entitlements under the illegal agreements.

43.  In considering a claim of unjust enrichment, four questions have to be asked: (1) was the plaintiff enriched; (2) was the enrichment at the defendant’s expense; (3) was the enrichment unjust; and (4) are there any applicable defences: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, at §67. 

44.  Illegality is one of the defences that may be invoked to defend a claim of unjust enrichment[30]. In Tinsley v Milligan, the majority of the House of Lord held that a claimant to an interest in property which had been acquired in the course of an illegal transaction may recover if he is not forced to plead or rely on the illegality: at 376E.  The rationale underlying the reliance rule is that the court will not assist a claimant who formed his cause of action under an illegal contract because to do so would involve the Court lending its aid to the performance of the illegal contract, which is contrary to public policy: Best Sheen Development Ltd v Official Receiver. 

45.  In HKSAR v Lau Kam Ying at §§20-21, the Court of Final Appeal approved the decision in Best Sheen Development Ltd while considering it was unnecessary to come to a concluded view on Tinsley v Milligan.  In this Court’s decision in Kan Wai Chung & Ors v Hau Wun Fai & Ors at §8.7, Cheung JA noted that the Hong Kong court had in a number of cases adopted the Tinsley v Milligan approach[31] and considered it was bound by the decision of the Court of Final Appeal’s decision.  The UK Supreme Court’s decision in Patel v Mirza, being handed down just two days ago, was not referred to in the judgment.  Subsequently, in Arrow ECS Norway AS v M Yang Trading Ltd [2019] HKCA 176 at §5.4, which concerns a security for costs application, Cheung JA, when addressing the defendants’ submission that they had a strong ground of appeal because Tinsley v Milligan had been overruled by Patel v Mirza, observed that:

“the defendants have to show that this Court was plainly wrong in its previous decision and therefore that decision should no longer be followed before they could make any headway with the Patel argument. At best the defendants’ argument on Patel is only a reasonably arguable point for the purpose of the appeal but we are not convinced that it is such a strong point that we should exercise the discretion in favour of the defendants.”

46.  In the present case, the Judge (at §22) took note that Tinsley v Milligan was overruled in Patel v Mirza, but was of the view that Hong Kong courts were bound by the Court of Final Appeal’s decision and would apply Tinsley v Milligan.  The Judge’s view is consistent with that expressed in a number of Court of First Instance decisions[32].  

47.  Subsequent to the Judge’s decision, in the judgment given by Yuen JA in Monat Investment Ltd v All Persons in Occupation of Part of No 16 Ma Po Tsuen [2023] 2 HKLRD 1311 at §§42 to 57, a case that concerns adverse possession, this Court considered that the approach in Patel v Mirza should be adopted in Hong Kong.  Given the 1^st defendant’s stated position that illegality is irrelevant to her counterclaim (see §40(1) above), the question of whether to follow the reliance rule in Tinsley v Milligan or to adopt the range of factors approach in Patel v Mirza is not engaged in the discussion of her primary argument.  We shall return to this when considering her alternative argument under this ground.  

48.  The 1^st defendant’s primary challenge is directed at the Judge’s holdings that any expenses incurred by her (resulting in improvement to the Properties) were made in the implementation of the illegal development scheme and the illegal agreements, and the court should not assist to give effect to them.  Mr Chong stresses that the 1^st defendant is not seeking to share the “fruit of the development”.  He argues that the counterclaim is a classic claim of unjust enrichment in that (1) the plaintiff has obtained substantial financial benefit from the investment made by the 1^st defendant (and the 15^th defendant), which has turned the plaintiff’s land into land capable of being developed and built upon (and in the case of Lots 104B and 104C two houses had been completed); (2) the enrichment is unjust because the 1^st defendant cannot recover her contractual entitlements due to the illegality of the agreements; and (3) accordingly, the 1^st defendant is entitled to claim the increased value of the Properties which is represented by the amount of investment or expenses spent on the plaintiff’s land. 

49.  These arguments are fraught with a number of difficulties.  First, on the Judge’s findings, the pleaded basis of the unjust enrichment claim is simply not made out.  The counterclaim, as pleaded, is premised on (1) the plaintiff succeeding in recovering the Properties on the basis of illegality; and (2) the plaintiff has knowledge of the illegality: §47 of the Re-Re-Amended Defence and Counterclaim, see also §23 above.

50.  However, at the trial the plaintiff did not rely on illegality as the basis for his claim against the Ding defendants[33]. Right at the start of the trial, Mr Shum made it clear that the plaintiff’s claim against the Ding defendants was based on resulting trust and founded on the fact that the conveyance from the plaintiff or the subsequent assignments to the Ding defendants were voluntary transfers without consideration such that the beneficial interest in the Properties had remained vested in the plaintiff.

51.  Further, and importantly, the salient facts found by the Judge, which are not challenged on appeal, are that: (1) the development scheme, which was initiated by the 1^st defendant, and the Development Agreements as well as the agreements that Green House and the 15^th defendant made with the Ding defendants were all illegal; (2) neither the Deceased nor the plaintiff had knowledge that the development scheme would involve the Ding defendants making false declarations to the Director of Lands; (3) the interest in the Properties remain vested in the plaintiff by reason of resulting trust; and (4) under the illegal agreements the 1^st and 15^th defendants were to develop and build small houses on the Properties.  

52.  The pleaded basis of the unjust enrichment claim is therefore not made out because, firstly, the beneficial interest in the Properties was held to have remained vested in the Deceased by the operation of resulting trust.  Secondly and importantly, the Judge found the plaintiff did not have knowledge of the illegality of the development scheme. 

53.  Second, on the Judge’s above findings, all the works carried out by the 1^st and 15^th defendants on the Properties, including the construction of the two houses, were an integral part of the implementation of the illegal development scheme and illegal agreements.  Although it is argued that the 1^st defendant is only claiming the increased value of the Properties and not seeking to share “the fruit of the development”, it is just a matter of semantics.  The counterclaim is in truth and in fact a claim to recover what had been spent on carrying out the illegal agreements.  It follows that the Judge did not err in holding that any expenses for improving the Properties, rendering the land fit for building houses or building the two small houses were incurred in the course of, and formed part of the implementation of, the illegal scheme and the illegal Development Agreements. 

54.  Third, the submission that the 1^st defendant does not need to rely on the illegal agreements for her counterclaim is untenable.  On Mr Chong’s argument, the plaintiff’s enrichment is unjust because the agreements were illegal as a result of which the 1^st defendant cannot obtain her contractual entitlements.  Plainly, the 1^st defendant is relying on the illegality of the agreements to satisfy the “unjust” factor of her counterclaim. 

55.  Fourth, there is no real distinction between seeking to recover investment in the land made in the implementation of an illegal scheme (which is the plaintiff’s alternative claim in Chan Yau v Calvin Chan) and claiming the expenses incurred in implementing an illegal development scheme but presented as the increased value in the land (which is the counterclaim here).  The argument that the 1^st defendant is only seeking the effect of her investment does not hold up to scrutiny when the very effect that she is after is the payments and expenses for implementing the development scheme.  

56.  The 1^st defendant also argues that when assessing mesne profits, the court is under an automatic and inherent duty to take into account the investment or improvement that the 1^st defendant (and the 15^th defendant) had brought to the Properties.  This argument was raised for the first time in the supplemental reply submission and has gone beyond the scope of the grounds of appeal in the Notice of Appeal and the two Supplemental Notices of Appeal.  This argument was also not raised before the Judge.  It is trite that an appeal is not the proper occasion for canvassing new points which have not been raised in the court below: China Gold Finance Ltd v CIL Holdings Ltd CACV 11/2015, 27 November 2015 at §48.  On this basis alone, this argument should be rejected.

57.  In any event, this new argument has no merit.  The 1^st defendant relies on McGregor on Damages (21^st ed) at §39-049 which states that:

“The normal measure of damages is the market rental value of the property occupied or used for the period of wrongful occupation or user. Authority is somewhat sparse but this measure is consonant with general principles and with the name of the action for wrongful occupation as one for mesne profits, … If the defendant makes improvements on the land, the rental value should be assessed upon the unimproved value.” (emphasis added)

58.  The last sentence on which the 1^st defendant places much reliance should, however, be read together with its footnote (footnote 367) which states that:

“The land itself will of course be recovered in its improved state, and there is no clear machinery whereby the claimant may be made to pay for these improvements even if there are sufficient damages for wrongful occupation from which the value of the improvements could be deducted.”

59.  At the trial, the 1^st defendant did not adduce any evidence on the market rental value (or the increased value) of the Properties.  The only valuation evidence of the Properties came from the plaintiff’s surveyor whose evidence was accepted by the Judge[34].  As stated in his valuation report dated 15 September 2016 (at p.13), the plaintiff’s surveyor assessed the market rental value of the Properties “on the basis of letting with immediate vacant possession disregarding all its authorized structures and free from all legal encumbrances”.  The Judge assessed the mesne profits of the Properties (except Lots 104Bs and 104C) on the basis of the market rental value given in the surveyor’s report.  In relation to Lots 104B and 104C, the Judge disregarded the two houses built on them in assessing the market rental value[35].  

60.  In the circumstances, having regard to the plaintiff’s expert evidence which was accepted by the Judge and the absence of evidence from the 1^st defendant on what might be the unimproved rental value of the land, even if we were to allow the 1^st defendant to run this argument, she simply cannot demonstrate that the Judge was wrong in his assessment of the mesne profits. 

61.  I turn next to Mr Chong’s alternative argument under this ground, which is that the counterclaim of unjust enrichment is not tainted with illegality.  This argument was also only raised in the supplemental reply submission.  At the trial, the 1^st defendant had argued that the Judge should apply Patel v Mirza instead of Tinsley v Milligan, which the Judge did not accept.  The argument was initially repeated in the Notice of Appeal filed when the 1^st defendant was acting in person.  In the first written submission lodged by counsel after she became legally represented in this appeal, it was expressly stated that the 1^st defendant would only argue the issues set out in §1 of the submission (see §38 above).  The argument that the approach in Patel v Mirza should have been adopted instead of that in Tinsley v Milligan was not pursued.  The belated alternative argument in the supplemental reply which in essence is seeking to revive the abandoned argument is therefore a surprising turn.  In any event, it does not advance the 1^st defendant’s case for the reasons discussed below.  

62.  In Patel v Mirza, an action to obtain restitution and recover money transferred under an illegal contract, the UK Supreme Court by a majority laid down a new “range of factors” (or “factors-based”[36]) approach in place of the reliance test in Tinsley v Millgan.  Under this approach, the primary question is whether allowing recovery of the claim tainted with illegality would be harmful to the integrity of the legal system, and the court could not answer the question without regard to a trio of necessary considerations, namely (1) the underlying purpose of the prohibition that has been transgressed, (2) any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (3) the possibility of overkill unless the law is applied with a due sense of proportionality[37].

63.  When considering illegality as a defence in unjust enrichment, the range of factors approach will entail the court making a flexible assessment of whether the public interest would be harmed by enforcement of the illegal contract, taking into account the underlying purpose of the prohibition which was illegally contravened, public interest, and whether denial of the claim would be proportionate, bearing in mind that punishment is not a concern of the civil courts[38].

64.  In the context of the present case, the illegality of the development scheme and the Development Agreements stems from the false declarations and misrepresentations made or which would be made by the Ding defendants to the Director of Lands in the course of applying for building licences under the SHP.  On the first of the trio of considerations, the underlying purpose of the statutory declaration that each of the Ding defendants was required to make is to prevent misuse or abuse of the SHP by, inter alia, ensuring that the applicant is properly eligible and the application is a genuine one that meets the policy objectives.  On the evidence before the Judge[39], the SHP set out to enable “indigenous villagers of the New Territories to build houses for themselves and to preserve the cohesion of indigenous communities”; under the policy an applicant is not permitted to alienate his interests in the small house; and in relation to an applicant who has alienated his interests or provided false information or made false declaration in the course of his application (as in the case of the Ding defendants) the Director of Lands would take lease enforcement action or revoke the building licence, and/or refer the matter to the relevant authority for consideration of criminal prosecution.  

65.  On the second consideration, there is no discernible public policy (and the 1^st defendant has not identified any) that will be adversely affected by a denial of the 1^st defendant’s claim. 

66.  As to the third consideration, it is relevant to consider the 1^st defendant’s role in the illegal development scheme and her knowledge of it.  It is clear from the evidence that she had assumed a pivotal role and had been heavily involved in organising and implementing the development scheme.  She is the one who initiated the scheme, and is the developer, being the shareholder and director of the company that owned Green House and also a shareholder and director of the 15^th defendant.  She must be fully aware of the falsity of the declarations and representations made or to be made by the Ding defendants.  She knew of the agreements and deeds made between the Ding defendants and Green House or the 15^th defendant and the wills executed by some of the Ding defendants in favour of the 15^th defendant.  Additionally, some of the Ding defendants had executed powers of attorney in favour of her.  She also signed as a witness on the Undertakings and Guarantee Forms in the applications submitted by the Ding defendants to the Director of Lands and had further signed as the lawful attorney on the building licences granted to the Ding defendants.  In contrast, neither the Deceased nor the plaintiff was found to have knowledge that the development scheme involved the Ding defendants making false declarations or misrepresentations.

67.  In these circumstances, having regard to the policy factors involved and the public interest underlying the SHP, the requirement for the statutory declaration and the restriction against alienation of interests in the small houses, the nature and circumstances of the illegal conduct in question and the role and conduct of the 1^st defendant and her companies as well as the disparity between her culpability and that of the plaintiff, it is not a disproportionate response to disallow the 1^st defendant to recover what had been expended in implementing the illegal development scheme.  On the contrary, allowing her counterclaim would have the effect of enabling her to benefit from her own wrongdoings and would also be contrary to public policy consideration that the law should not be inconsistent and self-defeating.  In short, applying the approach in Patel v Mirza would also lead to a rejection of the 1^st defendant’s claim.  

68.  Under this alternative argument, Mr Chong has also sought to distinguish Chan Yau v Chan Calvin, and draw assistance from the case of Chung Tin Pui and the House of Lords’ decision in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669.  As discussed above (see §55), I do not agree that Chan Yau v Chan Calvin is distinguishable.  Further, in light of the above conclusion on the application of the approach in Patel v Mirza to the circumstances of this case, Louis Chan J’s decision in Chung Tin Pui and the House of Lords’ decision in Westdeutsche Landesbank Girozentrale do not assist the 1^st defendant.

69.  For the above reasons, Ground 1 fails.

F.3  Ground 2: The parties’ arguments

70.  The 1^st defendant’s arguments under Ground 2 may be summarised as follows:

(1)  The Judge was wrong to have disregarded the table of investment[40] prepared by the 1^st and 15^th defendants (“the Table”) and the documents[41] adduced by them at the trial (“D1/D15 Documents”) in that: (a) the Table is uncontroversial and supported by D1/D15 Documents which are contemporaneous and agreed documents; and (b) the 1^st defendant had not been cross-examined on the content of the Table.

(2)  The Judge’s criticism that there was no satisfactory proof of the value of the 1^st and 15^th defendants’ investment was unfair. On the evidence before him, it was open to the Judge to accept that the value of the Properties had increased and to have regard to the costs of developing the land and the construction of the two small houses.

71.  In response, the plaintiff argues that:

(1)  If Ground 1 fails, there is no need to deal with Ground 2 which relates to the quantum of the unjust enrichment claim.

(2)  Ground 2 is a challenge to the Judge’s assessment of evidence and finding of fact.  The 1^st defendant faces a high threshold of showing the Judge was plainly wrong.

(3)  It is wrong to say that the Table is uncontroversial and D1/D15 Documents are agreed documents.  While there is no dispute as to the authenticity and admissibility of the documents, the plaintiff has not admitted the truthfulness of their content.  At the trial, no evidence was given as to by whom, when, how and why the Table was compiled or its content.  Nor was there evidence on who had paid for the expenses incurred.

(4)  The expenses asserted by the 1^st defendant cannot amount to evidence to support the counterclaim of unjust enrichment in that it cannot be taken as the increased value of the Properties.  

F.4  Ground 2: Discussions

72.  As the plaintiff rightly points out, with the rejection of Ground 1 which challenges the dismissal of the counterclaim, it will not be necessary to consider Ground 2 since it is directed at the Judge’s holding that there was no evidence on the particulars and quantum of the counterclaim as pleaded.  Nevertheless, for the sake of completeness, I will deal briefly with the arguments under Ground 2.

73.  To recap[42], the essence of this part of the Judge’s finding is that (1) the amount of investment or expenses said to be incurred by the 1^st and the 15^th defendants cannot be equated with the increased value of the Properties; (2) there is no valuation evidence to show what was the increased value of the Properties and in turn the enrichment to the plaintiff; and (3) the evidence of investment or expenses incurred by the 1^st and 15^th defendants is in any event unsatisfactory.

74.  I deal firstly with the 1^st defendant’s second argument under this ground, which relates to (1) and (2) of the Judge’s above findings.  Mr Chong accepts that at the trial there was no valuation evidence to show the increased value of the Properties. He, however, argues that the Judge could have found on the evidence that the 1^st and 15^th defendants had developed the Properties, built two small houses and incurred development costs, and also the value of the Properties had increased.  But even accepting all of these, it is far from discharging the burden of proving the counterclaim as pleaded and its quantum.   

75.  The counterclaim as pleaded is for the “increased value of the [Properties] after site formation works, and the value of the plaintiff’s houses” (see §24 above).  To make good her claim, the 1^st defendant has to prove by credible evidence: (1) the market value of the Properties; (2) there was an increase in the value of the Properties as a result of the works that she had caused to be done to the Properties; (3) the amount of increase in the value of the Properties; and (4) the market value of the two small houses built on Lots 104B and 104C. 

76.  Admittedly, no evidence of the sort was adduced at the trial and the counterclaim is therefore not made out.  Whatever costs or expenses that were incurred in developing the Properties and building the two small houses cannot, without more, be likened to the increased value of the Properties and/or the market value of the two houses. It is also not for the court to speculate on the market value of the Properties and the two small houses.  The Judge is eminently correct in finding that the amount of investment or expenses made or incurred by the 1^st and 15^th defendants could not be equated with the increased value of the Property, and to hold that there was no evidence to support the counterclaim as pleaded.   

77.  As to the other argument that the Judge erred in disregarding the Table and D1/D15 Documents and should have awarded to the 1^st defendant the total amount stated in the Table after setting off the plaintiff’s claim for mesne profits, this is in substance a challenge to the Judges’ evaluation of the evidence and finding of fact.  Quite apart from the fact that the total amount of the expenditure stated in the Table cannot be taken to be the increased value of the Properties and/or the value of the two small houses, this argument is further flawed for the reasons below.   

78.  First, the Table is, as described in its title (“Tai Mong Tsai DD 252 Lot 104 工作進度表”), a list of work progress that contains 152 entries, of which 81 of them carry an amount described as “行政費/ 建築費/ 丁屋合作費” (administrative fee/ building fee/ small house cooperation fee).  The total amount comes up to HK$11,912,838.50.  At the trial, no evidence was given on the identity of the person(s) who prepared the Table, the time and manner of its compilation or the primary source of the content.  Nor had the 1^st defendant referred to the D1/D15 Documents in her witness statement or oral evidence.  

79.  It is indisputable that the burden is on the 1^st defendant to prove her counterclaim by credible and reliable evidence.  The fact that the plaintiff did not cross-examine her on the Table does not mean that she has discharged her burden.  The plaintiff, as he is entitled to, had in the closing submission commented adversely on the accuracy and reliability of the Table and the weight to be attached to it[43].

80.  Second, the fact that the D1/D15 Documents were included in the trial bundles only means that there is no dispute as to their authenticity and admissibility.  It does not bar the plaintiff from taking issue with the correctness or reliability of their content or the weight to be given to the documents.  It is open to the plaintiff, as he did, to deal with the documents in his submission instead of in the cross-examination of the 1^st defendant. 

81.  Third, the Judge is likewise not bound to accept the Table.  It was open to him to have regard to the fact that there was no evidence to explain or elaborate on the content of the Table and to find that there was no satisfactory evidence to support the items and amount stated in it.  

82.  Fourth, the Judge is also entitled to find that D1/D15 Documents only provided limited proof of the expenses claimed by the 1^st and 15^th defendants.  Among other things, the figures in the Table do not tally with the bills, receipts and cheques in D1/D15 Documents.  The total amount shown on those documents is less than half of the total amount stated in the Table.  Further, some of the expenses do not even relate to the value of the Properties, such as the Ding fees, the administrative fees paid to Green House and the 15^th defendant and the air fare of the trip made by the 1^st defendant and her lawyer(s) to the United Kingdom.  

83.  Fifth, Mr Chong had included in his reply skeleton argument an Annex setting out 22 of the items in the Table which he submits are supported by documents in D1/D15 Documents.  The 22 items come to a total amount of HK$3,270,338.90, which is less than one-third of the total amount stated in the Table.  Mr Chong explains that the Annex has excluded items that are “arguably for recovery of money paid for an illegal purpose” such as payment of Ding fees[44]. The concession made by counsel and the fact that the amount of these 22 items is substantially less than the total costs stated in the Table further highlight the unsatisfactory nature and unreliability of the Table.  They also demonstrate that the Judge was well justified in finding there was no satisfactory evidence to support the expenses claimed by the 1^st defendant and that very limited documents had been produced to prove the expenses claimed in the Table.  

84.  In sum, without doing the bare minimum of proving her claim at the trial, the 1^st defendant cannot wield a broad brush on appeal to justify the quantum of her unjust enrichment claim.  She has simply failed to show that the Judge was wrong, let alone plainly wrong, in finding there is no satisfactory evidence to support the amount of her counterclaim. 

85.  For the above reasons, Ground 2 also fails.

G. Conclusion and disposition

86.  In conclusion, the appeal has no merits. I would make the following orders:

(1)  The 1^st defendant’ appeal is dismissed.

(2)  On a nisi basis, the 1^st defendant pays the plaintiff the costs of the appeal with a certificate for two counsel.

Hon Cheung JA:

87.  I agree with the judgment of Chu VP.

Hon Yuen JA:

88.  I agree with the judgment of Chu VP.