MILLION WAY LTD v. TO SHING WO AND OTHERS

HCA 436/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 436 OF 2007

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BETWEEN

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J U D G M E N T

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1.  This is an action for the performance of a sale and purchase agreement in respect of lot 715 in DD 132 in Tuen Mun (“the Lot”) and to restrain one of the vendors from objecting to it. 

Background

2.  The 1st defendant is a Chinese worshipping trust or a wui which is subject to section 15 of the New Territories Ordinance, Cap. 97.  The 2nd and 3rd defendants are and were at all material times its managers. 

3.  The ownership of the 1st defendant is divided into nine shares and each share is owned by one or more members.  The 4th defendant is and was at all material times a member of the 1^st defendant. 

4.  It is the plaintiff’s case that the 1^stdefendant had in September 2004 a total of 18 members.  But one member had passed away and his position had not been taken up by his successor.

5.  The 1st defendant is the owner of the Lot.  It acquired the Lot on 19 May 1911.  Its members had a meeting on 6 September 2004 and resolved to sell the Lot to the plaintiff at price of $200 per sq. ft.  The resolution was made unanimously by those attending.  The 4th defendant was one of those who attended.  The members attending the meeting also signed their names on the minutes of meeting dated 6 September 2004 (“the September Minutes”) (pages B1 to B1A).  (The form on which the September Minutes were written was provided by the District Office for use by tsos/tongs/wuis that were subject to section 15 of the New Territories Ordinance.  The form is used to record the agreement of the members in a meeting on matters that may require consent of the District Officer under section 15.) 

6.  The 2nd and 3rd defendants said that they had not attended the meeting, but they also signed the September Minutes afterwards to signify their concurrence with the decision of the meeting.  There were a total of 14 signatures in the September Minutes including those of the 2nd, 3rd and 4th defendants.

7.  On 4 October 2004, the 2nd and 3rd defendants as managers of the 1st defendant entered into a provisional agreement of sale and purchase (pages B2 to B2K) with the plaintiff at the office of the plaintiff’s then solicitors. 

The plaintiff’s case

8.  The plaintiff alleged that before signing the provisional agreement, its director, Mr Tse (“Tse”), sought an assurance from the 2nd and 3rd defendants that all the members of the 1st defendant had consented to the sale.  The 2nd and 3rd defendants then represented to Tse and his fellow director that all the members of the 1st defendant had agreed.  They also showed Tse the September Minutes to support the representation.  Upon this representation, the plaintiff then entered into the provisional agreement and paid the 1^st defendant a 10% deposit.  The plaintiff further said that but for this representation, it would not have entered into the provisional agreement.

9.  The provisional agreement contains a clause 8 which was inserted at the suggestion of the plaintiff and agreed to by the 2nd and 3rd defendants on behalf of the 1st defendant.  The clause and its English translation read:

「8.          雙方必須於賣方獲祖堂批出同意書當日起計的一個月內成交。成交時買方必須付清尾數。賣方須於本合約起計的一年內，獲祖堂批出同意書，如在上述一年內仍未獲祖堂批出同意書，買方有權要求取消此買賣合約。取消後，賣方必須立即將訂金及部份地價原銀不帶利息退回給買方。些後互不追究。」

“8.       Completion shall take place within one month from the date of which the Vendor has obtained the consent of Tso/Tong.  Balance of purchase price shall be paid by the Purchaser upon completion.  The Vendor shall obtain the consent of Tso/Tong within one year from the date of this Agreement.  Should the Vendor failed to do so, the Purchaser shall obtain the refund of all deposits and part payment but without interest from the Vendor and the Purchaser has the right to terminate the Agreement.  The parties shall have no further claim against each other thereafter.”

There is no dispute that the expression “Tso/Tong” in clause 8 means the Tso/Tong Section of the Tuen Mun District Office.

10.  Since the 1st defendant is an entity subject to section 15 of the New Territories Ordinance, Cap. 97, consent from the District Officer is required before the Lot can be sold.  The relevant part of section 15 provides:

“15.       Whenever any land is held from the Government under lease or other grant, agreement or licence in the name of a clan, family or t’ong, such clan, family or t’ong shall appoint a manager to represent it.  Every such appointment shall be reported at the appropriate New Territories District Office of the Home Affairs Department, and the Secretary for Home Affairs on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Secretary for Home affairs (which included the District Officer), and shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land. …”

11.  The plaintiff then pleaded that on about 21 October 2004, the 2nd and 3rd defendants passed to Mr Tse a full set of papers.  They were for submission to the District Officer to apply for consent under section 15 for the sale of the Lot by the 1st defendant.  The September Minutes were included in the papers.  There was also an application (“the Managers’ Application”) (pages B3 to B3B) by the 2nd and 3rd defendants.  By this document, they as managers of the 1st defendant certified that all members of the 1st defendant had agreed to the application for consent to sell.  There was also an application by 16 members for consent.  This application contained the names and signatures of the members who were also applying for the consent form the District Officer (“the Members’ Application”) (pages B4 to B4A).  (It now transpired that all these documents were prepared on forms prescribed by the District Officer for use of tsos/tongs/wuis on matters that require consent under section 15.) 

12.  The plaintiff pleaded that the handing over of the set of papers on about 21 October 2004 by the 2nd and 3rd defendants to the plaintiff amounted to a further representation by them to the plaintiff that the proposed sale had the unanimous consent of all the members of the 1st defendant.  (I note here that there are two more Members’ Applications dated 9 November 2004 (page B9A) and 18 January 2005 (page B9D) respectively that were made by two more members of the 1st defendant.)

13.  One Ms Chang of the plaintiff’s then solicitors prepared the formal sale and purchase agreement for the parties pursuant to the provisional agreement.  For this purpose, Ms Chang used an agreement she prepared previously for another transaction as the precedent.  She made no change to the terms of the precedent except the particulars of the transaction.  However, she overlooked the fact that clause 35(3) of the precedent differed from clause 8 of the provisional agreement.  There was also a clause 36 which provided that the formal agreement was to supersede all previous agreements.

14.  Clauses 35 and 36 read:

“35. (1)   The Vendor avers that application has already been made [to the] District Officer for his consent to the sale of the Property to the Purchaser (“the Consent”).

(2)   Both parties are fully aware that completion can not (sic) take place unless and until the Tuen Mun District Officer has issued the Consent.

(3)  It is agreed that if the Consent is not issued within 1 year from the date of this agreement, this agreement shall so cease to have any effect, the Vendor shall within 3 days from the date on which that happens return to the Purchaser in full all the deposit and part payment received by them from the Purchaser and neither party shall have any claim against the other.

36. Full and Final agreement

This agreement supersedes all previous agreements, whether oral or in writing, entered into by the parties hereto or their agents.”

15.  Upon signing of the formal agreement (pages B6A to 6AB) by the plaintiff, Ms Chang assured Mr Tse and his fellow director that the formal agreement had incorporated in it all the key provisions in the provisional agreement.  In reliance on this explanation, Mr Tse and his fellow director executed the formal agreement without knowing that clause 8 had not been incorporated and clause 35(3) of the formal agreement was a different provision.

16.  The plaintiff further pleaded that Ms Chang had given the same explanation of the formal agreement to the 2nd and 3rd defendants.  She then took the 2nd and 3rd defendants to the 1st defendant’s solicitors Leung Kin & Co. (who were introduced by Ms Chang) for them to execute the formal agreement before one Ms Ng of that firm of solicitors.  Ms Chang also assured Ms Ng that all key provisions in the provisional agreement had been incorporated into the formal agreement.  (Ms Chang in her evidence however agreed that the formal agreement was signed by 2nd and 3rd defendants in the presence of Ms Ng in the office of Leung Kin & Co.  The agreement was then returned to her and was then signed by the plaintiff’s directors in her presence at her office.)

17.  The plaintiff then pleaded that the substitution of clause 8 of the provisional agreement by clause 35(3) of the formal agreement was not known to and unintended by both parties.  It therefore seeks the rectification of the formal agreement by replacing clause 35(3) with clause 8 of the provisional agreement.  The plaintiff further pleaded that all the members of the 1st defendant were bound by the formal agreement as rectified. 

18.  The plaintiff pleaded an alternative that it signed the formal agreement without realising the replacement of clause 8 of the provisional agreement by clause 35(3) of the formal agreement and its mistake was known to the 1st defendant through the 2nd and 3rd defendants.  The plaintiff therefore asked for rectification of the formal agreement by replacing clause 35(3) with clause 8 of the provisional agreement.

19.  At the commencement of the trial, I discussed with counsel for the plaintiff on the plaintiff’s contention of the effect of the formal agreement.  As a result, the plaintiff added a further alternative that even without rectification, the 1st defendant is still bound by the formal agreement and no member of the 1st defendant can object to the sale or to the giving of consent by the District Officer to the sale.

20.  It later turned out that the 4th defendant, who had agreed to the sale at the meeting on 6th September 2004, had later raised objection to the sale to the District Officer of Tuen Mun thereby blocking the grant of consent by the District Officer under section 15 of the New Territories Ordinance.

21.  The plaintiff then pleaded that the 4th defendant had signed the September Minutes and the Members’ Application.  He had therefore represented to the plaintiff that he had agreed to the sale.  The plaintiff had in reliance of his representations entered into the provisional and formal agreements and paid the 1st defendant HK$522,720 or 20% of the purchase price as deposit and part payment.  The 4th defendant was therefore estopped from opposing the sale.  

22.  Alternatively, the plaintiff pleaded that the 4th defendant had made the misrepresentations fraudulently or recklessly and should pay damages to the plaintiff.  The plaintiff also seeks damages from the 1st defendant for breach of the formal sale and purchase agreement.

23.  Since the plaintiff has added an alternative plea that the formal agreement with or without rectification is still binding on the 1st defendant and its members, it therefore seeks a declaration that the agreement should continue to have effect for a reasonable time after judgment has been given in this action.  This declaration is sought so that the 1st defendant can and shall be obliged to ask the District Officer to reconsider its application for consent to the sale if the plaintiff should succeed in obtaining a declaration that the 4th defendant was not entitled to object to the sale.

24.  Further to the prayer for the declaration, the plaintiff also seeks a decree of specific performance of the formal agreement and damages in addition to or in lieu thereof.  There is also a claim for damages for misrepresentation.  I do not think I can give this decree as the performance of the formal agreement depends on the consent of the District Officer. 

Defence and counterclaim of the 1st, 2nd and 3rd defendants

25.  The 2nd and 3rd defendants agree that they had entered into the provisional agreement on 4 October 2004 as managers of the 1st defendant as the vendor, but they deny of having represented to the plaintiff on that day that all the members of the 1st defendant had agreed to the sale.  I think their entering into the provisional sale and purchase agreement as managers on behalf of the 1st defendant already implied their belief that all the members of the 1st defendant had agreed to the sale.  I do not think they would have done so if they did not harbour such belief.  This is further supported by a letter signed by them and dated 18 January 2005 (“the Confirmation Letter”) which was enclosed in a letter of Leung Kin & Co. to the District Officer dated 20 January 2005.  I will refer to this letter in more detail below (pages B12 to B13 of the bundle).  I also think that it is reasonable for the plaintiff to assume from the making of the provisional sale and purchase agreement that all the members of the 1st defendant had agreed to the sale.  I in particular note that the plaintiff was aware through a member of the 1st defendant Mr Siu Chi Hung (“Chi Hung”) (now deceased) that the 1^st defendant’s members had agreed to the sale in a meeting.

26.  The 1st, 2nd and 3rd defendants also agreed that 16 members of the 1st defendant had signed the Members’ Application dated 24^th October 2004.  This document was submitted to the District Officer to apply for his consent under section 15 of the Ordinance for sale.

27.  Regarding the formal agreement, the 1st, 2nd and 3rd defendants deny that clause 35(3) and 36 were inserted by mistake.  They resist the plaintiff’s claim for rectification.  They further pleaded that the formal agreement had terminated on 25 October 2005 pursuant to clause 35(3) as the District Officer had not given the consent after a lapse of one year.  The agreement therefore did not bind the members of the 1st defendant anymore.  The 1st defendant has also returned to the plaintiff the deposit and part payment of HK$522,720.

28.  The 2nd and 3rd defendants also said in their witness statements that in addition to those who had signified their agreement to the sale in the September Minutes or the three Members’ Applications submitted to the District Officer, there were still other members of the 1st defendant.  They also said that even if a member of the 1st defendant had agreed to the sale and signed the Members’ Application, such member could still object to the sale at a later stage.  Their stance is thus in tandem with that of the 4th defendant though not exactly the same.  But they did not say under what condition or circumstances could such member object to the sale afterwards.

29.  The 1st, 2nd and 3rd defendants also filed a witness statement by To Luen Hing, the son of the 4th defendant, who said that he was a beneficiary of his father’s 1/9 share of the 1st defendant and was entitled to object to the sale.  He only became aware of the sale when notice of the same was posted by the District Office in December 2005.  He then objected to it as he thought that the market price was way above $200 per sq. ft.  The staff of the District Office did not accept his objection as he was not a registered member of the 1st defendant.  He therefore asked his father the 4th defendant to lodge an objection to the District Office. 

30.  On the day of final submissions, I told counsel for the 1st to 4th defendants that I could only consider To Luen Hing’s evidence if there was an issue properly raised as to his entitlement to object to the sale.  Though the 4^thdefendant has raised this issue, it is not appropriate for the 4th defendant to rely on it.  The reason being that the 4th defendant is being sued personally and he can only resist the claim by relying on his own rights.  He cannot say that To Luen Hing is entitled to object and he thereby acquired the right to object. 

31.  However, the 1st defendant can raise this issue as it can resist the claim by relying on the objection of its member(s).  The defence of the 1st, 2nd and 3rd defendants was then re-re-amended to incorporate the ground of defence that To Luen Hing was a member of the 1st defendant and he had objected to the sale in such capacity.

Defence of the 4th defendant

32.  The 4th defendant pleaded that at the night of 5 September 2004, Chi Hung, a fellow member of the 1st defendant (now deceased), telephoned him and told him that there was a purchaser willing to purchase the Lot at $200 per sq. ft. which was more than the market price.  Chi Hung asked him to attend the meeting on the next day and vote for the sale.  Chi Hung further said that the Lot had been vacant for years and not produced any income.  Chi Hung threatened him that should he disagree with the sale, he would have to bear responsibility for the consequence.  He then voted for the sale on the next day as Chi Hung had told him.

33.  He further pleaded that Chi Hung had misled him because the offer of $200 per sq. ft. was well below the market price and that the threat by Chi Hung amounted to duress on him. 

34.  However, when cross-examined by counsel for the 1st to 3rd defendants, he said that the Lot had produced no rental income for a long time and he thought $200 per sq. ft. was a reasonable price.  He was further asked whether he would have objected to the sale if he had known that the price was indeed $200 per sq. ft.  He said he would not.

35.  The 4th defendant has thus abandoned the argument that the offer at $200 per sq. ft. was below market price and he voted for the sale at this price because of Chi Hung’s duress on him.  His case in his evidence is that he voted for the sale at the proposed price because the price offered was reasonable rather than because of any alleged duress exercised by Chi Hung on him.  He also admitted of having signed the September Minutes and the Members’ Application for applying for consent from the District Officer. 

36.  However, he denied that he was a party to the provisional or formal agreement.  He pleaded that the parties to the agreements were the plaintiff and the 1st defendant and there was no privity of contract between him and the plaintiff.  He also pleaded that he never intended to contract with the plaintiff.  He denied that his signature on the September Minutes had made him a party to and was thus bound by the agreements.  He also denied that he had, by signing the September Minutes or the managers’ Certificate for submission to the District Officer, made any representation to the plaintiff.

37.  He admitted of having sent a written objection to the sale to the Tuen Mun District Officer and the District Officer had not given consent to the sale.  He also pleaded and relied on To Luen Hing’s objection.  I have already dealt with this when discussing the defence of the 1st, 2nd and 3rd defendants above.

The issues

38.  (i) The 1st issue is whether the formal agreement should be rectified by replacing its clause 35(3) with clause 8 of the provisional sale and purchase agreement.

(ii) The 2nd issue is whether there was any misrepresentation by the 2nd, 3rd and 4th defendants as alleged by the plaintiff.

(iii) The 3rd issue is whether the 4th defendant was entitled to inform the District Officer that he objected to the sale. 

(iv) The 4th issue is whether To Luen Hing in or before January 2005 had a beneficial interest in and was a member of the 1st defendant who could object to the sale.

(v) The 5th issue is whether the formal agreement is still effective with or without rectification.

39.  The 1st and 2nd issues are independent of the rest.  The 3rd and 4th issues are not dependent on the decision on the 1st and 2nd issues. 

40.  Regarding the 5th issue, if I should hold in favour of the plaintiff in the 3rd and 4th issues, then I have to consider whether the formal agreement is still effective with or without rectification.  However, if I should hold in favour of the 4th defendant in the 3rd issue or the 1st defendant in the 4th issue, then no consent would be given by the District Officer as the District Officer had made it clear that consent would not be given against the will of a member.  In that event, the formal agreement without rectification would have lapsed on 25 October 2005.  Even if rectified, it would still have lapsed within a reasonable time after 25 October 2005 as it would not have remained alive indefinitely when the District Officer was not going to give consent to it.  There must be an implied term that it would terminate after a reasonable time if the District Officer did not consent to the sale.

THE DOCUMENTS IN RELATION TO THE APPLICATION TO THE DISTRICT OFFICER FOR CONSENT

41.  There are a number of documents that I have referred to above.  They need particular attention and require detailed description.  These documents were submitted to the District Officer to apply for consent for the sale to go ahead. 

42.  The first document is the September Minutes of the meeting of the 1st defendant held on 6 September 2004.  The document is in Chinese.  It is not contained in the book of minutes kept by the 1st defendant. It is contained in a simple form provided by the District Office.  This form is for use of tsos/tongs/wuis to record the decision of their members in meeting resolving the appointment of substitute managers and transfer of properties.  After a meeting is held and the minutes form duly completed, it will be presented to the District Officer together with other necessary documents for consideration of consent under section 15 of the New Territories Ordinance.

43.  The September Minutes recorded the meeting of the 1st defendant having been held on 6 September 2004 at 10:00 a.m. at Kar Cheuk Restaurant in Lam Tei (Yuen Long).  It contains 14 signatures including those of the 2nd, 3rd and 4th defendants and Chi Hung.  Underneath the signatures are the record of the matter discussed and the resolution.  The free translation reads:

“Discussion Item(s):       By reason that No. 715 in D.D. 132 of this Wui has been left until and neglected for over a decade, Siu Chi Hung, member, proposed that the land be sold.  This is seconded by To Yu Piu (transliteration) and To Shing Wo, and unanimously approved.

Resolution:                     Transfer to Million Way Limited for $200”

The resolution should really mean $200 per sq. foot.  These minutes then recorded that the meeting ended at 11:30 a.m. 

44.  The next document is the Managers’ Application dated 25 October 2004.  It is also compiled on a form provided by the District Office for use in application for consent.  It is a bilingual document.  The title reads “Application for Sale/Mortgage/Transfer of Tso/Tong Property”.  It contains the name of the 1st defendant and the names of its managers the 2nd and 3rd defendants.  It refers to the sale of the Lot at $2,613,600.  The reasons given for the sale are that the Lot had been left idle and neglected and the proceeds of sale would be used for ancestral worship in spring and autumn and for repair of ancestral grave and shrine. 

45.  I understand that the 1st defendant does not have any ancestral grave and does not conduct any ancestral worship in spring or autumn.  The celebration of Tin Hau Festival is not ancestral worship.  I also understand that the 1st defendant does not own any shrine to venerate the Goddess Tin Hau.  It only celebrates the Tin Hau Festival at the Tin Hau Temple in Tuen Mun which is frequented by the residents of Tuen Mun.

46.  The reasons given in the Managers’ Application are the usual ones given by tsos/tongs in seeking consent from the District Officer to sell land.  I think the person who filled out this document just treated the 1st defendant as an ordinary ancestral worshipping tso or tong rather than a religious Wui as it is.  In any case, nothing turns on these reasons for sale.

47.  Underneath the reasons is a bilingual pre-printed certificate which reads “I certify that all members agree to the above application.  Members list duly completed and attached herewith.”

48.  Underneath the statement is a chop marked date of 25 October 2004 and the signatures of the 2nd and 3rd defendants.  I should also mention that there is another chop marked date of 21 October 2004 at the top right hand corner of the form.  Ms Chang’s evidence is that she received these forms duly completed on 21 October 2004.

49.  The 3rd document is compiled on another bilingual form provided by the District Office for use by tsos/tongs.  It is entitled “List of Members” (page B5).  It is the membership list referred to and enclosed in the Managers’ Application.  It contains the name of the 1st defendant at the top.  The title of the next section reads “Members of the Tong/Tso as follows:-”.  There are 16 names stated in this section.  Of these 16 names, 14 of them are the same as those in the September Minutes.  The two names in this document that are not present in the September Minutes are To Wing Luk and Siu To Wing, deceased.  At the bottom are the signatures of the 2nd and 3rd defendants as the persons reporting the List of Members to the District Officer.  There is also the chop marked date of 25 October 2004.

50.  The 4th document is the Members’ Application dated 25 October 20045.  It was also compiled on a Chinese form provided by the District Office.  Its title reads “Application for consent to sell/transfer property of tso/tong”.  Under the title is a printed statement, the translation of which reads “We are the members of Tin Hua Wui of Tuen Tsz Wai.  We have now agreed to sell/transfer the following property of this tso/tong”.  The name of the 1st defendant and the village “Tuen Tsz Wai” were filled in by hand.  The description of the Lot then followed. 

51.  There is then a table of five columns for filling in the names and signatures of the members.  The 1st column is for numbering of the members.  The 2nd column is for their names.  The 3rd column is for the numbers of their identity cards.  The 4th column is for their signatures.  The last column is for stating the reason for any member not signing.  The reasons suggested at the top of this column are “being overseas”, “not reached adulthood” and “hospitalised for illness”.

52.  Each page of this document can contain the particulars of 10 members.  There are two pages containing the particulars of the same 16 members as contained in the List of Members above mentioned.  Only Siu To Wing did not sign and the reason given is that he had passed away.

53.  Under the table are the signatures for the 2nd and 3rd defendants and a chop marked date of 25 October 2004.

54.  In addition to the List of Members and the Members” Application both dated 25 October 2004, there are two more Lists of Members (pages 9B and 9D) and Members’ Applications (pages B9A and B9C).  One List and one Member’s Application are dated 9 November 2004 and contained the name of Madam Ko.  The other List and the other Members’ Application are dated 18 January 2005 and contained the name of Siu Shui Fat.  The total number of members contained in the three Lists of Members and Members’ Applications is 18.

55.  After the making of the formal agreement, Leung Kin & Co. wrote on 26 October 2004 on behalf of the 1st defendant to the District Officer for consent for the sale (page B8).  The Managers’ Application, the List of Members and the Members’ Application all dated 25 October 2004 and the September Minutes were provided to the District Officer for consideration.

56.  On 10 November 2004, Leung Kin & Co. further wrote (page B11) and provided to the District Officer the List of Members containing the name of Madam Ko and the Members’ Application by Madam Ko (pages B9A and B9B).

57.  Sometime in January 2005, the District Office notified Leung Kin & Co. that there was an objection to the sale.  Leung Kin & Co. then wrote to the District Officer on 20 January 2005 (page B13) persevering in the quest for consent.  The letter enclosed the Confirmation Letter signed by the 2nd and 3rd defendants, another list of members (“the Full List of Members”) (page P111) and a List of Members containing the name of Siu Shui Fat and his Members’ Application.  The Full List of Members contained the names of the 18 members above-mentioned who together owned the nine shares, their identity card numbers and how the nine shares were divided amongst them.

58.  The free translation of the Confirmation Letter reads:

“Since the founding of Tin Hau Wui until now, all matters within Tin Hau Wui have been handled in accordance with the groups representing the 9 shares as in the annexed list.  Apart from people named in the list, no other person can participate in any matter in Tin Hau Wui.  Hereby so declared.”

It is the evidence of the 2nd and 3rd defendants then when they signed this letter, they did not know that the objector was the 4th defendant.

59.  The letter of Leung Kin & Co. of 20 January 2005 above-mentioned also said:

         “We are instructed to advise that the shares of Tin Hau Wui are distributed in the manner particularized in column 3 of the abovementioned List of Members.  As all the members of the Tin Hau Wui have given their consent for sale of the above property and signed all your prescribed forms.  Therefore, no objection will be valid unless the objection is raised by the members of Tin Hau Wui.

         We shall be obliged if you kindly re-consider our client’s application and let us have your written consent for sale of the said property as soon as possible.”

60.  However, the District Officer eventually declined the application for consent as the objection by the 4th defendant remained unresolved.  The District Officer made it clear in the correspondence that so long as there was an objection by a member, the consent would not be granted.  The District Officer said in a letter dated 10 July 2008 (page B38) to the plaintiff’s present solicitors said:

“I refer to your letter of 27 June 2008 under reference and wish to advise as follows:

(i)      In applications for sale of Tso properties, it is essential that the Tso satisfied SHA that members of the Tso reached unanimity on the sale and no objection is received by this Office or all such objections received have been withdrawn.

(ii)     If all objection(s) by Wui members against the proposed sale of the captioned Wui property are withdrawn, this office will consider to proceed with the case.”

61.  Hence, if To Luen Hing, the son of the 4th defendant, should be held the member of the 1st defendant, his objection should also have stopped the District Officer from granting the consent.

THE EVIDENCE

The evidence of PW1 the plaintiff’s director

62.  The plaintiff’s first witness is Tse, one of its two directors.  He made two witness statements.  In his first witness statement, he said Chi Hung, who was known to him for about 10 years, approached him in about mid-August 2004 and told him that the Lot owned by the 1st defendant was for sale.  Chi Hung invited him to purchase it.  He and his fellow director then inspected the Lot and decided to offer to purchase it for development purpose.  After several rounds of negotiation with Chi Hung, the price was agreed at $200 per sq. ft. or $2,613,000.

63.  In about mid-September 2004, Tse and his fellow director went to the office of the plaintiff’s then solicitors to enter into the provisional agreement with the 1st defendant.  They met Chi Hung and the 2nd and 3rd defendants there.  He enquired the 2nd and 3rd defendants if all the members of the 1st defendant had agreed to the sale.  The 2nd and 3rd defendants showed him a copy of the September Minutes as evidence that all members had agreed to the sale at $200 per sq. ft.  He saw some signatures on the Minutes but did not know how many members the 1st defendant had.  He thought that the 2nd and 3rd defendants would not have entered into the provisional agreement unless all the members had agreed.  On the assurance by the 2nd and 3rd defendants that all members had agreed, he and his fellow director then instructed Ms Chang of the solicitors to prepare the provisional agreement.  He did not know English and the Agreement was prepared in Chinese.

64.  The parties met again on 4 October 2010 at the same office to execute the provisional agreement.  Tse suggested the addition of clause 8 (as quoted above) to give more protection to the plaintiff.  This clause gave the plaintiff the right to cancel the transaction if the District Officer did not give consent within a year.  The 2nd and 3rd defendants accepted this clause. 

65.  Tse also said in oral evidence that the 2nd and 3rd defendants had suggested an amendment to clause 4 so that the deposit and part payment at HK$261,360 would be kept by the solicitors and not be released to them.  Ms Chang then explained to them the provisional agreement with these amendments and they then executed it.  The plaintiff also paid $261,360 as deposit and part payment to the solicitors as stakeholders pending the marking of the formal sale and purchase agreement.

66.  On 25 October 2004, Tse and his fellow director went to the same office again to execute the formal agreement.  Ms Chang produced an English formal agreement to them and told them that the terms in the Chinese provisional agreement had been incorporated into the English agreement.  Since Tse and his fellow director could not read English, they just relied on what Ms Chang had told them and executed the formal agreement for the plaintiff.  They also paid a further sum of HK$261,360 as deposit and part payment.  The deposits totalling $522,760 were later paid to the 1st defendant’s solicitors, Messrs Leung Kin & Co.  Leung Kin & Co. was introduced by Ms Chang to the 1st defendant as its solicitors in the transaction.

67.  In about April 2005, Chi Hung told Tse that a member of the 1st defendant had objected to the sale.  The identity of this member was never disclosed in the evidence.

68.  In about June 2005, the plaintiff’s then solicitors learnt that the District Officer was withholding his consent because a member of the 1st defendant had objected to the sale.  But it is not known up to today whether the member referred to by Chi Hung was the same member who raised his objection to the District Officer.

69.  On 5 December 2005, Leung Kin & Co. on behalf of the 1st defendant wrote to the plaintiff’s solicitors and purportedly declared the termination of the formal agreement on 25 October 2005 pursuant to clause 35(3) thereof.  The deposit and part payment of $522,760 was also returned.

70.  The plaintiff’s then solicitors did not accept that the formal agreement had come to an end.  They also admitted to the plaintiff that Ms Chang had made a mistake in not incorporating clause 8 of the provisional agreement into the formal agreement but wrongly adopted clause 35(3) from a precedent.

71.  In July 2006, the plaintiff’s present solicitors enquired with the District Officer for the identity of the objecting member of the 1st defendant.  It later transpired than the member who raised objection to the District Officer was the 4th defendant.  But the 4th defendant denied that he was the undisclosed member referred to by Chi Hung. 

72.  Tse further said in his second witness statement that the 2nd and 3rd defendants, when executing the provisional and formal agreements, had represented to the plaintiff that the sale of the Lot at the $200 per sq. ft. had been agreed to unanimously by the members of the 1st defendant.  He also said that the 4th defendant had by signing the September Minutes and the Members’ Application also represented to the plaintiff that he had agreed to the sale. 

73.  In his oral evidence, he agreed that he was wrong in referring to a meeting in September.  He agreed that the first meeting was on 4 October 2004 when they made the provisional agreement.  He also said that Chi Hung had given him a copy of the September Minutes when making the provisional agreement and that was to prove that all members of the 1st defendant had agreed to the sale.  The document was also to be given to the plaintiff’s solicitors for preparation of the provisional agreement.  However, this was contradicted by Ms Chang’s evidence referred to below.  Ms Chang said that no copy of the September Minutes was shown to her on 4 October and she only received this on 21 October 2004.

74.  Tse also said that the 2nd and 3rd defendants had on 25 October 2004 at the solicitor’s office showed him the Managers’ Application and the Members’ Application both dated 24 October 2004 to prove that the 1st defendant had completed all necessary documents for applying for consent from the District Officer.  The parties also executed the formal agreement on that occasion.  He agreed that the Managers’ Application and the Members’ Application were prepared for submission to the District Officer and not for the purpose of being shown to him.  He also agreed that he signed the formal agreement pursuant to the provisional agreement and not because he had been shown the Managers’ Application and the Members’ Application.

The evidence of PW2 Ms Chang

75.  Ms Chang worked for the plaintiff’s former solicitors.  She said in her witness statement that she was responsible for handling the plaintiff’s purchase of the Lot from the 1st defendant.  When Tse told her in the beginning of September 2004 that the plaintiff wanted to buy the Lot from the 1st defendant and the 1st defendant was a Wui, she gave Tse the blanks forms for making the September Minutes, the Managers’ Application and the Members’ Application for use by the 1st defendant’s managers.  A few days later, Tse gave her the particulars of the plaintiff and the price of the Lot and told her to prepare the provisional agreement. 

76.  On 4 October 2004, Tse, his fellow director, the 2nd and 3rd defendants all went to her office to make the provisional agreement.  Tse suggested the making of clause 8 to protect the interest of the plaintiff.  The 2nd or 3rd defendant suggested the making of clause 4 which provided the stakeholding of the deposit by the solicitors instead of releasing the same to the 1st defendant.  She then explained to them the provisional agreement which was in Chinese by reading out the terms to them.  They expressed their understanding and executed the same.  On 21 October 2004, somebody sent her the September Minutes, the Managers’ Application and the Members’ Application all duly completed.

77.  In answer to my questions, she said that it was her understanding that the members of the 1st defendant had held a meeting and agreed to the sale, otherwise, the 2nd and 3rd defendants would not have signed the provisional agreement.

78.  Since the price of the transaction exceeded $1,000,000, the parties had to be separately represented.  At the request of Tse, Ms Chang introduced Leung Kin & Co. to represent the 1st defendant.  Ms Chang’s counterpart in Leung Kin & Co. was one Ms Ng.  Ms Chang told Ms Ng that the provisional agreement had been signed.  The documents for applying for consent were also prepared and would be given to Ms Ng for submission to the District Officer.

79.  Since Ms Ng was busy, Ms Chang undertook the task of preparing the formal agreement as well.  Ms Chang had previously prepared a formal agreement for the sale of land by a tong.  She then used that agreement as a precedent and adopted it for this transaction.  However, she overlooked the fact that clause 8 of the provisional agreement was different from clause 35(3) of the precedent and did not incorporate clause 8 to replace clause 35(3).  She then arranged for Tse and his fellow director to execute the formal agreement.  She told them that all the important terms in the formal agreement were in accordance with those in the provisional agreement.  She particularly told them that clause 35(3) of the formal agreement was the same as clause 8 of the provisional agreement.  Tse and his fellow director then executed the formal agreement.

80.  The 2nd and 3rd defendants also went to her office on 25 October 2004.  She gave them the same explanation on the formal agreement as she did to Tse and his fellow director.  After they had expressed their understanding, she took them to Leung Kin & Co. and introduced them to Ms Ng.  She also told Ms Ng that the formal agreement had followed the provisional agreement and that she had also done the explanation of the formal agreement to the 2nd and 3rd defendants who understood the same.  She then left Ms Ng to witness the execution of the formal agreement by the 2nd and 3rd defendants.  She also gave Ms Ng the papers for applying for consent so that Ms Ng could submit the same to the District Officer on behalf of the 1st defendant.

81.  On 7 January 2005, Ms Ng phoned Ms Chang and said that there was an objector to the sale.  Ms Chang then relayed the information to Tse.

82.  On 29 June 2005 and upon receiving from Ms Ng a fax copy letter of the District Officer (page B18) declining consent, Ms Chang then discovered her mistake in using clause 35(3) of the precedent to replace clause 8 of the provisional agreement when she prepared the formal agreement.

83.  On 5 December 2005, Leung Kin & Co. on behalf of the 1st defendant wrote to the plaintiff’s former solicitors (pages B19 to B19F) and said that the formal agreement had terminated and returned the deposit and part payment.

84.  In cross-examination, Ms Chang insisted that both parties signed the provisional agreement together in her presence on 4 October 2010, but she had not seen or was given a copy of the September Minutes on that day.  She only received the full set of papers for applying for consent on 21 October 2004.

85.  In the course of cross-examination, the solicitors for the 1st to 3rd defendants produced a copy of the formal agreement which had been signed by the 2nd and 3rd defendants but not by the plaintiff.  She then recalled that the formal agreement had been signed by the 2nd and 3rd defendants in the presence of Ms Ng before it was signed by the plaintiff’s directors.  The plaintiff’s directors only signed it after it had been returned to her by Ms Ng.

86.  Despite the formal agreement being dated 25 October 2004, she also clarified that she had brought the 2nd and 3rd defendants to see Ms Ng at Leung Kin & Co.’s office on 26 October.  She said this by relying on a letter from her firm to Leung Kin & Co.  The letter was dated 25 October, but the receipt chop mark of Leung Kin & Co. on it was dated 26 October.

                   The evidence of the 2nd defendant

87.  The 2nd defendant said in his witness statement that his father was a manager of the 1st defendant.  His father passed away in 1999 and he was elected by the members of the 1st defendant to take his father’s place in December 2000. 

88.  He did not know when or by whom the 1st defendant was set up but it had been in existences for a very long time.  The legend was that there were eight ladies who pooled their resources together to purchase two pieces of land in the name of the 1st defendant for worshipping the deity Tin Hau.  In order to reflect the greater contribution by one of them, the ownership of the 1st defendant was divided into nine shares with two shares being given to the one contributing more and the others being given one share each.  The two pieces of land held by the 1st defendant are the Lot, which had not generated any income for over ten years, and another lot that had been let out for rental.

89.  The nine shares of the 1st defendant are now held by some villagers of Tuen Tsz Wai, San Hing Tsuen and Chun Uk Tsuen in Tuen Mun.  The custom of the 1st defendant is for the shares to be succeeded to by the descendants of the members.  

90.  The 2nd defendant further said that it was the custom of the village that whenever a son got married, he would have a division of family properties with his father.  He regarded the ownership of a share of the 1st defendant as part of the family properties.  He gave an illustration of a father who owned one share of the 1st defendant and had three sons, when one son got married, he would be entitled to half of the share.  If the 1st defendant should have a distribution of income to its members, the father and the married son would divide equally the income distributed to that share.  If all three sons should have married, the father and each of the sons would have 1/4 of the share of the 1st defendant.

91.  However, he also said in oral evidence that a son before marriage would also be entitled to a share of the income as distributed.  His father would save up his share and release it to him upon his getting married.  He said this was what he did.  But he did not know if the other member families would or would not as a matter of fact do the same.  He further accepted the suggestion of counsel for the 4th defendant that a male baby at birth was already a member of the 1st defendant and his father would start saving up his share pending his marriage.  This eligibility to membership as he alleged was similar to that of ancestral worshipping tsos and tongs of the New Territories though members of such tsos and tongs are entitled to be distributed the benefits regardless of whether they are married.  On his evidence, he was a representative for his three sons, his two brothers and their sons.  There were thus 11 members in his family including he himself that were represented by him.  All these however contradicted his witness statement where he said a son would only be entitled to a share of the distributed income upon marriage.

92.  He in fact went even further in oral evidence by saying that his mother and wife were also entitled to share the distribution of the 1st defendant.  That made the membership of the 1st defendant very extensive and is contrary to what he said in his witness statement and the evidence of the 3rd defendant.  His evidence on eligibility of membership and benefit of the 1st defendant is very confusing.

93.  He also said in his witness statement that the way the share of the 1st defendant and the income thereof was being dealt with was a matter for the individual families and other members of the 1st defendant had no right to interfere.  He elaborated in oral evidence that even if a father should give no share to the sons after their marriage, the 1st defendant would do nothing to assist the son or to make distribution directly to the son.  That may simply mean that there is no rule that conferred any right or benefit on the sons whether married or otherwise and the sons are not members of the 1st defendant unless and until they have acquired membership by succession.

94.  He further said that despite the large number of people having the right to enjoy the benefit of the shares of the 1st defendant, not all beneficiaries were registered as members of the 1st defendant.  This was because of the deep rotted notion in the villages of division of family after a son got married.  The members of the 1st defendant also trusted one another.  After the 1st defendant had distributed the income to the member families, each family would further divide the income to those who were entitled to the benefit.  He said whether a beneficiary was registered as a member was therefore unimportant.  The usual practice was to register the son or grandson as a member after the passing away of the father.  He also said that he had been sharing with his farther the income distributed by the 1st defendant, but he was not registered as a member until after his father’s death.

95.  However, he also said that the way to deal with the share of the 1st defendant and the income thereof was a matter for the individual families, if the members of a family should so concur, they could register the son or grandson before the father’s death.

96.  He also referred to the case of Madam Ko Choi Hei also known as Wong Lan and her son Chung Chi Loy who together owned one share of the 1st defendant.  Madam Ko was the foster daughter of s Mr Ko.  Ko did not have any off spring.  After Ko passed away, his share devolved upon Madam Ko.  According to the wish of Madam Ko, her son Chung Chi Loy was also registered as a member of the 1st defendant.

97.  He was not sure of the procedure for registering a member of the 1st defendant.  His understanding was that if there was confirmation by the managers and no member raised any objection, then those listed in a list of members submitted by the managers to the District Officer were members.  He also said that the members of the 1st defendant exercised self-discipline in all their affairs and the District Office did not interfere with them.

98.  In oral evidence, he agreed with the suggestion of counsel for the 4th defendant that the 1st defendant did not have a list of registered members.  He also said save for this occasion of seeking consent from the District Officer to sell the Lot, he had never given any list of members to the District Officer and was unaware of whether there was such list.  But he also repeatedly said in oral evidence that the District Officer had a list of their members though he had never read it.

99.  He further agreed with counsel for the 4th defendant that if he should compile a list of members, he should include the three married sons of To Yue Bill as they had divided the family properties with To Yue Bill and were entitled to be registered as members of the 1st defendant.  But he also agreed that he could not tell whether all the eight families had sons or whether all their sons had married.  Hence, on his criteria of beneficial entitlement, he could not tell how many beneficiaries there were.  But he also agreed that he signed the Managers’ Application because he thought that it was correct.  The Managers’ Application contained a certificate by him saying “I certify that all members agree to the above application.  Members list duly completed and attached herewith”.

100.  His evidence appears to be that if any member or his married son should ask him to include the son’s name on the list of members, he would do so.  That included the son of the 4th defendant To Luen Hing.

101.  He also said in paragraph 14 of his witness statement that the Full List of Members had clearly shown the members of all the shares of the 1st defendant.  This is not consistent with the rest of his statement as referred to above. 

102.  He confirmed in oral evidence that when he signed the Managers’ Application in October 2004 and the Confirmation Letter in January 2005, he believed that all members of the 1st Defendant had agreed to the sale.  He knew that the Full List of Members was to be enclosed in the Confirmation Letter.  He said the Full List was compiled by Chi Hung and he thought it was a complete list.  (If the Full List was indeed compiled by Chi Hung, then I think Chi Hung would have exercised care to make sure that it was a complete list as Chi Hung was keen in accomplishing the transaction.)  It was because he thought that all members had agreed to the sale, he therefore guessed that the objector was an outside busybody or troublemaker.  He only learnt in June 2005 that the 4th defendant was the objector.

103.  However, he also said that there were members who were not included in the Full List of Members.  But he could not explain why in such a case he would have signed the Confirmation Letter.  He later changed his evidence and said that the Full List of Members did not cover all members and it was unnecessary to do so.  He also said words to the effect that the names in the list were the representatives of members.  If the 1st defendant was going to hold a meeting, notice would be given to those people named in this list.  Those people would attend the meeting as representatives of the members.  They would also sign the minutes to signify their agreement with the decision of the meeting.  Those who did not attend the meeting but agree with the decision would also sign the September Minutes later.  This evidence is however contradicted by the terms of the Confirmation Letter.

104.  Since he had become a manager of the 1st defendant in December 2000, his main duty was to distribute the rental income generated from the lot that was let out to the eight families. 

105.  Apart from the distribution of income, the 1st defendant also celebrated the Tin Hau Festival.  The celebration was organised by one of the families and the families would take turn to discharge this duty.  He also added in oral evidence that the members living in Tuen Tsz Wai were surnamed To and those living in San Hing Tsuen were surnamed Siu.  Madam Ko and her son Chung Chi Loy were living in Chung Uk Tsuen.  The Tos and Sius would take turn to organise the worship and celebration of Tin Hau Festival.  The Tos did so for two years and the Sius did it for the 3rd year.  Madam Ko and her son were not required to perform this duty.  Every year, the family responsible had to purchase some roast pigs and other food and paper offering and have them sent to the Tin Hau Temple for worshipping and celebration purpose.  Apart from the distribution of income and the celebration of the Tin Hau Festival, the 1st defendant had no other activity.

106.  The 2nd defendant also referred to the practice of the District Officer in posting notice of proposed sale of land before granting consent under section 15.  He said even if a member of the 1st defendant should have agreed to the sale beforehand, he could still object to the sale within the 14 days as stated in the notice of the District Officer.  He did not explain why.  He however believed that only members of the 1st defendant could object.  He did not know who else was in law entitled to object.  He also thought that if the District Officer should refuse to consent to a transaction, the transaction would be cancelled.

107.  He also said that despite the September Minutes having recorded his presence at the meeting on 6 September 2004, he was in fact not there.  He recalled that Chi Hung had paid him a visit one night in September 2004 and told him that all members of the 1st defendant had agreed to sell the Lot.  Chi Hung asked him to confirm the decision by signing on the September Minutes.  He then signed as requested.  He further said in oral evidence that he was not sure that the minutes stated that he was in support of the sale.  Despite this, he did say in cross-examination that he had agreed to the sale at the price of $200 per sq. ft. 

108.  He also agreed with plaintiff’s counsel that he and the 3rd defendant had no right to sell the Lot and the consent of all members was necessary before the Lot could be sold.  It was necessary to have the September Minutes for showing to the plaintiff that he and the 3rd defendant had the power to sell and for showing to the District Officer in applying for consent.  He also accepted that Chi Hung had given a copy of it to the plaintiff. 

109.  On 4 October 2004, Chi Hung arranged for him and the 3rd defendant to attend the office of the plaintiff’s former solicitors to execute the provisional agreement as managers of the 1st defendant.  He and the 3rd defendant also accepted Ms Chang’s introduction of Leung Kin & Co. to act as the 1st defendant’s solicitors in the transaction.

110.  He added in oral evidence that when he, the 3rd defendant and Chi Hung were at the office of the plaintiff’s former solicitors waiting to sign the provisional agreement, they had not communicated with Tse or his fellow director at all.  The two parties stayed at different sides of the reception area.  Ms Chang also conducted separate conferences with the two sides.  After Ms Chang had read out the contents of the provisional agreement to him and the 3rd defendant, they then signed the same.  Tse and his fellow director signed the provisional agreement in a separate conference and not in their presence.

111.  On 25 October 2004, he and the 3rd defendant went to the office of the plaintiff’s solicitors again and were taken to Leung Kin & Co. to execute the formal agreement.  They were served by Ms Ng of that firm.  The formal agreement was in English.  They could not read English and Ms Ng explained it to them.  He remembered Ms Ng’s explanation that if the District Officer did not give consent within one year after the making of the agreement, the agreement would automatically terminate.  The 1st defendant would then have to return the deposit and part payment but without any interest.  (That explanation was in line with the meaning of clause 35(3) of the formal agreement.)  He then executed the formal agreement as a manager of the 1st defendant.

112.  He also added in oral evidence that when they went to the office of the plaintiff’s solicitors on 25 October 2004, they had not met anyone from the plaintiff.  He also denied that Ms Chang had interpreted the formal agreement to them or told them that all terms in the provisional agreement had been incorporated in the formal agreement.

113.  Though Ms Ng of Leung Kin & Co. was not called as a witness, there is in fact an interpretation clause at the end of the formal agreement confirming that one Ms Ng Ka Yin of Leung Kin & Co. had interpreted the formal agreement to the 2nd and 3rd defendants.  I think Ms Ng Ka Yin is Ms Karen Ng though this was not addressed to in the evidence.

114.  Regarding his understanding of the terms of the provisional agreement and the formal agreement, he said Ms Chang had read out clause 8 of the provisional agreement to him.  Clause 35(3) of formal agreement had also been explained to him by Ms Ng of Leung Kin & Co.  He said he did not realise that clause 8 of the provisional agreement had not been incorporated into the formal agreement.  He had not thought about it.  He just left the matter to the solicitors thinking that they would have handled the matter correctly.  He thought the terms of the provisional agreement and the formal agreement were the same.  He later agreed in re-examination that he understood from Ms Ng that if the District Officer did not give consent, the agreement would terminate by itself.

115.  After the execution of the formal agreement, the 2nd and 3rd defendants left the transaction to be followed by Leung Kin & Co.  Leung Kin and Co. on behalf of the 1st defendant and by a covering letter of 26 October 2004 (page B8) submitted the Managers’ Application, the Members’ Application and the List of Members all dated 25 October 2004 and the September Minutes to the District Officer.

116.  At the beginning of 2005, Ms Ng advised the 2nd defendant on the phone that someone had made an objection to the sale to the District Officer and the sale could not proceed.  He and the 3rd defendant were not aware of the identity of the objector.  They thought the objector was someone unrelated to the 1st defendant.  In order to facilitate the completion of the sale, he and the 3rd defendant signed the Confirmation Letter dated 18 January 2005 to the District Officer.  The Confirmation Letter stated that only those people stated in the Full List of Members enclosed in the letter could participate in the matters of the 1st defendant.

117.  When cross-examined by counsel for the plaintiff, he also agreed that he had to put in a Members’ Application that contain all the names of the members.  That was the reason for the two Member’s Applications signed by Madam Ko and Mr Siu Shui Fat and the two Managers’ Applications signed by him and the 3rd defendant in relation to Madam Ko and Siu Shui Fat that were submitted to the District Officer on about 9 November 2004 and 20 January 2005 respectively.  But he then said that because of village custom, he did not see it necessary to put in the names of his sons (or indeed the names of the married or unmarried sons of the other named members).

118.  However, the District Officer by a letter of 24 June 2005 advised Leung Kin & Co. that one of the 1st defendant’s members had objected to the sale and unless the difference was resolved amongst the members, the District Officer would not give the consent.  The 2nd and 3rd defendants then became aware that the objector was a member of the 1st defendant.  Later on, they learnt that the 4th defendant and his son To Luen Hing were objecting to the sale.  To Luen Hing was married and had already had a division of family property with his father.  He regarded To Luen Hing as a beneficiary of and lawful successor to a share of the 1st defendant.  But the 2nd defendant was not sure if To Luen Hing had the right to object to the sale.  The 2nd defendant also thought that it was unfortunate that the 4th defendant and To Luen Hing should have objected.

The evidence of the 3rd defendant

119.  The 3rd defendant is a resident of Sun Hing Tsuen.  He adopted the witness statement of the 2nd defendant on the history, structure and administration of the 1st defendant except that he did not know Madam Ko or how she had become entitled to a share of the 1st defendant.

120.  He knew that consent of the District Officer was required before the 1st defendant could complete the sale of its land.  He also said that he had not attended the meeting of members on 6 September 2004.  He just signed the September Minutes when Chi Hung presented the same to him and told him that all other members had agreed to the sale.  He agreed that the September Minutes were made to show the agreement of all members to sell the Lot.  He also agreed that without the unanimous agreement, he could not have sold it.

121.  He confirmed in oral evidence that he agreed with the sale at $200 per sq. ft.  He did not know that the Government’s rate of resumption of agricultural land was at $381.60 per sq. ft., but he did not think that it was a secret and he could have learnt about it upon enquiry.

122.  He also adopted the evidence of the 2nd defendant on the signing of the provisional agreement.  His evidence was more or less the same as the evidence of the 2nd defendant on their visit to the office of the plaintiff’s solicitors to sign the provisional agreement, on how the 1st defendant was introduced by Ms Chang to Ms Ng of Leung Kin & Co. and on their visit to Leung Kin & Co. to sign the formal agreement.  He also said that Ms Ng had explained the whole of the formal agreement to him.  She told him that if the District Officer did not give consent to the sale within a year, the formal agreement would be cancelled automatically and the deposit had to be returned to the plaintiff.  He maintained this in oral evidence.

123.  Regarding the objection to the sale lodged with the District Officer, he also shared the same misunderstanding of the 2nd defendant and thought that it was made by somebody unrelated to the 1st defendant.  Later, Chi Hung told him that the objectors were the 4th defendant and his son To Luen Hing.  He thought the 4th defendant as a member of the 1st defendant had the right to object.  He thought that since To Luen Hing was one of the lawful successors, he had no choice but to accept his objection.

124.  When cross-examined by counsel for the 4th defendant, he also agreed that all males at birth would be members of the 1st defendant automatically but the mothers, wives and daughters would not become members.  This was however not in line with his witness statement.

125.  Regarding distributions from the 1st defendant, he would pocket them all and not share any with his two sons as they were not married.  The 1st defendant also had no rule that would require him to keep any share of the distribution for his sons pending their marriages.  This is different form the evidence of the 2nd defendant.

126.  He said there was no mechanism of registration of members.  He also said that the List of Members dated 25 October 2004 and submitted to the District Officer was an incomplete list prepared by Chi Hung.  But he agreed that Chi Hung had told him to register the members in case of objection from someone.  Regarding the Full List of Members, it was prepared by Chi Hung who told him that it contained all members.  He trusted Chi Hung and signed the Confirmation Letter without reading the Full List.  He intended that the Full List was indeed a full list.  (I also note that there was no reason why Chi Hung should have prepared an incomplete list but told him that it was a full list.)  He also adopted the 2nd defendant’s evidence in the witness statement that the Full List of Members clearly showed all the members of the 1st defendant.  But he also alleged that the Full List containing 18 names was inaccurate despite what Chi Hung had told him.  He alleged that the names of the three sons of the 4th defendant should also be included in the list.  He further said that the names of all married sons should be included too.

127.  Though he said that the 1st defendant had a rule that married sons had the right to share the distribution, no one would bother if any member did not abide by this rule and refuse to share the distribution with the married sons.  For the sons of member families who have emigrated elsewhere, he would not even know about their marital status.

128.  When cross-examined by counsel for the plaintiff, he agreed that without the agreement of all members, he could not have sold the Lot.  He also agreed that to produce the September Minutes with signatures was to show that all members had agreed to the sale.  But he also said that members who agreed could still object to it later.  He did not explain why.

129.  When he signed the Managers’ Application, he intended that all members should be listed in it.  But he did not complete the List of Members and could not tell if anyone had been missed out.

The evidence of To Luen Hing

130.  The 1st defendant also called To Luen Hing.  He said in his witness statement that he was born and raised in Tuen Tsz Wai.  His father is a member of the 1st defendant.  He married in 1988 and since then had shared with his father the money distributed by the 1st defendant.  He did not register as a member as he did not think it necessary.  But according to the tradition of his family, he was entitled to part of his father’s share in the 1st defendant.  Hence, the sale of the Lot by the 1st defendant affected his interest.  If his father should pass away, his father’s share in the 1st defendant would be owned by him and his brothers together.

131.  In about December 2004, he saw on a notice board in Tuen Tsz Wai a notice about the application by the 1st defendant for consent from the District Officer to sell the Lot.  The notice said that if anyone should object to the application, he should raise it with the District Officer within a month.  He thought the value of the Lot was much higher than $200 per sq. ft.  At that time, the Government was paying $381.60 per sq. ft in resumption of agricultural land.  The Lot was also agricultural land.  He then gave the District Officer a letter of objection dated 18 December 2004.  He attended a meeting with the staff of the District Office in early January 2005 and was told that he was not a registered member of the 1st defendant and the objection should better be made by his father.  (This showed that the District Office had a list of the members of the 1st defendant.)  He thought that anyone whose interest was affected by the sale could raise the objection with the District Officer.  He thought the 1st defendant’s sale of the Lot would affect his interest and he should have the right to object.  However, in order to avoid any argument, he asked his father the 4th defendant to send in a written objection dated 7 January 2005 to the District Officer.  He also signed his name on this objection.  When submitting the objection to the District Officer, he and his father had not notified the 2nd or 3rd defendants or other members of the 1st defendant as he did not think it necessary.

132.  He also added in oral evidence that he regarded the 2nd and 3rd defendants and Chi Hung as problematic.  He did not elaborate the reason for this allegation.  I note that the 2nd and 4th defendants are very familiar with each other.  The 4th defendant is aged 70 and is 14 years older than the 2nd defendant.  They have known each other since childhood.  Their houses are separated by 8 to 10 houses in between.  The 2nd defendant addresses the 4th defendant as elder brother Shing.  If the 4th defendant and To Luen Hing did not want the 2nd defendant to know that they were going to lodge an objection with the District Officer, they could at least as a matter of courtesy inform him afterwards.

The evidence of the 4th defendant

133.  The 4th defendant was also born and raised in Tuen Tsz Wai.  He said in his witness statement that in 1958 when he was 20 years old, his father passed away.  He then succeeded to his father’s share in the 1st defendant and became a member of the 1st defendant.  He was still single by then. 

134.  He alleged that he agreed to the sale of the Lot at $200 per sq. ft because of the duress of Chi Hung, but he changed his stance in oral evidence.  He said that he had agreed to the sale at $200 per sq. ft which was a reasonable price as the Lot had generated no income for many many years. 

135.  He agreed that he had signed the September Minutes, but he regarded that as internal record.  He knew that the 1st defendant would be selling the Lot as he had signed the September Minutes and agreed with the sale.  He regarded his signature on the September Minutes as his authority for Chi Hung to carry on with the sale of the Lot though the decision of the meeting had not yet been written in the September Minutes when he signed his name there.  He also expected Chi Hung to carry on with the sale though the name of the purchaser was not mentioned.  He also did not think it necessary to have a further meeting after Chi Hung had concluded the negotiation of the sale with the purchaser.  

136.  When counsel for the 1st to 3rd defendants asked him whether he would agree with the sale if the payment would be made in 10 years or would be by 10 installments, he did express disagreement.  But those were extraordinary terms not contemplated by the parties in the transaction and would not enter into my consideration.  It is clear that parties were contemplating an ordinary sale and purchase which would be completed by full payment soon after consent was given by the District Officer.  His evidence on lodging of objection with the District Officer was similar to that of his son To Luen Hing.

137.  He said he did not make known to the 2nd and 3rd defendants of his objection because he found it embarrassing to do so, not that he found the 2nd or 3rd defendant problematic as his son alleged.

138.  He regarded his son, To Luen Hing, as a member of the 1st defendant as his son was married and had divided the family property with him.  He also shared the 1st defendant’s distribution with his son though he had not told other people about it.  His father told him that a male of the family after getting married would become a member of the 1st defendant.

ANALYSES AND DECISIONS

                   Rectification of the formal agreement

139.  The 2nd and 3rd defendants said that on the occasion when they signed the provisional agreement, they did not have a meeting with the plaintiff’s directors.  They said that each side had its own meeting with Ms Chang for signing the agreement.  Tse and Ms Chang however said that there was just one meting where both sides signed the agreement together.  Amendments to clauses 4 and 8 were also proposed and agreed in the meeting. 

140.  I think there was no point in having separate meetings for the parties to sign the provisional agreement.  It was also convenient to hold one meeting where both sides can resolve any proposed amendment there and then.  If separate meetings were to be conducted for each side, it would have been more time consuming to seek the agreement from both sides to any amendment raised.  The inclusion of clause 4 for the 1st defendant and clause 8 for the plaintiff without the need for Ms Chang to undertake rounds of negotiation between the parties is proof that the provisional agreement was made in one meeting only. 

141.  I also find the evidence of the 2nd and 3rd defendants on this point unrealistic.  The parties went to the solicitors’ office to make the provisional agreement for the sale of the Lot.  There was no need for them to avoid each other.  In fact, some of them on both sides knew each other as they had been to the same secondary school in their younger days.  It was just natural that the ones who were acquainted would have exchanged greetings and made introductions for the others. 

142.  On this point, I believe in Ms Chang and Tse and disbelieve the 2nd and 3rd defendants.  I think the 2nd and 3rd defendants were just too eager to say that that they had no contact with Tse and his fellow director at the solicitors’ office for fear that, if otherwise, they would be held liable for misrepresentation.  I find that both parties had signed the provisional agreement in the same meeting and in the presence of Ms Chang.

143.  I also find that Ms Chang had explained the provisional agreement to both sides in the same meeting by reading out to them the clauses as they were written in the document.  I think there is no dispute on the mode of explanation.

144.  Regarding the preparation of the formal agreement, I accept Ms Chang’s evidence that she had made a mistake in preparing the formal agreement in that she thought clause 35(3) of the precedent she used was the same as clause 8 of the provisional agreement.  Counsel for the 1st to 4th defendants sought to argue that there was no mistake and that clause 8 should be fairly construed to mean the same as clause 35(3).   This is an invitation to me to rewrite clause 8 and then say that there is no need for rectification.  I do not think this approach is open to me.  I cannot rewrite the parties’ bargain according to my notion and in the guise of fairness.

145.  Regarding the interpretation of the provisional agreement which is in Chinese and the formal agreement which is in English, the 2nd defendant said that he did not realise that clause 8 of the provisional agreement had not been incorporated into the formal agreement.  He had not thought about it.  He just left the preparation of the agreements to the solicitors thinking that they would have done it correctly.  He thought the terms of the provisional agreement and the formal agreement were the same.  In re-examination, he said he understood from Ms Ng that if the District Officer did not give consent, the agreement would terminate by itself.

146.  The 3rd defendant said that Ms Ng had explained the whole of the formal agreement to him.  She told him that if the District Officer did not give consent to the sale within a year, the formal agreement would be cancelled automatically and the deposit had to be returned to the plaintiff.  He maintained this in oral evidence.

147.  I find that Ms Ng of Leung Kin & Co. had indeed interpreted the formal agreement to the 2nd and 3rd defendants and they heard her saying that if the District Officer did not consent to the sale within a year, the formal agreement would be cancelled automatically and the deposit had to be returned to the plaintiff.  That was the meaning of clause 35(3) of the formal agreement. 

148.  The difference between clause 8 of the provisional agreement and clause 35(3) of the formal agreement is that clause 8 gave the plaintiff the right to cancel the transaction if consent was not given within a year whilst clause 35(3) would cause an automatic cancellation. 

149.  The 2nd and 3rd defendants had left the drafting of the formal agreement to the staff of the solicitors whom they believed would have done the right thing for them.  There is no evidence of any input by them to the terms of the formal agreement.  In fact, the preparation of the formal agreement was by Ms Chang only.  The 2nd and 3rd defendants just signed the agreement after the interpretation by Ms Ng which they understood.  It was obvious that they did not put their minds to whether clause 35(3) was the same as clause 8 of the provisional agreement.  Having heard them in the witness box, I do not think they realized that clause 35(3) was different from clause 8 when they heard the interpretation by Ms Ng.  I do not think they had the sophisticated minds of knowing the difference but choosing to keep quiet so as to secure the benefit of clause 35(3) which had not been discussed and agreed between the parties.  Though I have not heard from Ms Ng, I doubt if she would allow herself to be a party to such sharp practice bearing in mind that she was an employee of a solicitor’s firm and acquainted with Ms Chang.

150.  I refer to paras. 14-02 and 14-15 of Snell, 31st ed.:

“14-02 (b)       Position in equity.                   There will be cases where the terms if the instrument do not accord with the true agreement between the parties: a term may have been omitted, or an unwanted term included, or a term may be expressed in the wrong way.  In such cases, equity has power to reform, or rectify, that instrument so as to make it accord with the true agreement.  What is rectified is not a mistake in the transaction itself, but a mistake in the way in which that transaction has been expressed in writing.  “Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts.

14-15   (b)        Unilateral mistake.     The general rule is that there can be no rectification where the mistake is merely unilateral, as where one party had never even heard of the term sought to be inserted because his agent had not told him of it.  But there are three cases where the foregoing conditions are modified and a unilateral mistake may be rectified.

(1)        FRAUD.          “Fraud unravels all”, and so rectification may be granted in cases where although one party is mistaken the other is fraudulent.  Constructive fraud suffices, and so rectification may be decreed where a father has failed in his duty of explaining to his son a provision for the father’s benefit or to the son’s disadvantage in a settlement by the son, or where a retired solicitor has failed to explain to his fiancée provisions to his advantage in a marriage settlement drafted by him and made by her.

(2)        ESTOPPEL.                By what appears to be a species of equitable estoppel, if one party to a transaction knows that the instrument contains a mistake in his favour but does nothing to correct it, he (and those claiming under him) will be precluded from resisting rectification on the ground that the mistake is unilateral and not common.  Under this head the evidence of the knowledge and intention of the defendant must be such as to involve him in a degree of sharp practice, or at least “the conduct must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake.”  Actual knowledge by the defendant of the mistake is not necessarily required.  It is sufficient that he wilfully and recklessly shut his eyes to the obvious or intended the other party to labour under a mistake and suspected, though does not actually know, that the other party is mistaken.

Fraud and estoppel apart, there is a line of cases in which there has been mere unilateral mistake by the claimant and yet the court has put the defendant to his election of either accepting a variation of the contract which will mend the claimant’s mistake (i.e. rectification) or submitting to rescission of the contract.  Even prior to the decision of the Court of Appeal in Great Peach Shipping Ltd. V. Tsavliris Salvage (International) Limited [2002] EWCA Civ 1407 these cases were of doubtful authority.  For the most part they can be explained as having been decided when the fact that the defendant knew of the claimant’s unilateral mistake was not recognised (as it is now) as a ground of rectification, but only for rescission: the court, by putting the defendant to election, gave him the opportunity of preserving the transaction, but only upon terms that he did not take advantage of the claimant’s mistake.  But now, if the defendant was ignorant of that mistake when the contract was made, he will not be compelled to choose between mending or abandoning his bargain.  “If conscience is clear at the time of the transaction, why should equity disrupt the transaction?”  The effect of Great Peace case is that a contract cannot be rescinded on the grounds of mistake, and there will seldom be circumstances in which this line of authority may be relevant.”

151.  I accept the reasoning in the above paragraphs of Snell.  I find that the 2nd and 3rd defendants were not aware of the difference between clause 35(3) and clause 8 when they heard the interpretation of the formal agreement from Ms Ng.  They just heard what Ms Ng said and understood that that the agreement would be cancelled automatically if no consent was forthcoming within a year.  They then executed the formal agreement on that basis.  The plaintiff has therefore failed to establish on a balance of probability that the 2nd and/or 3rd defendant was aware of Ms Chang’s mistake in using clause 35(3) of the precedent to stand for clause 8 of the provisional agreement.  I therefore dismiss the claim of rectification. 

Did the 4th defendant have the right to inform the District Officer that he objected to the sale?

152.  I deal with the 3rd issue ahead of the 2nd issue of misrepresentation. The 4th defendant denied that he was a party to the provisional and formal agreements.  

153.  The 1st defendant is not a legal entity but an unincorporated association (see Tang Yau Yi Tong & Another v. Tang Mou Sou Tso & Others [1996] 2 HKLR 212 at page 219).  The 2nd and 3rd defendants entered into the agreements as managers of and for the 1^stdefendant.  They did so as trustees of the beneficiaries of the 1^stdefendant of which the 4^thdefendant was one.  They made the agreements pursuant to the powers conferred on them by section 15 of the New Territories Ordinance though they also had the authorisation of the unanimous resolution of the members of the 1st defendant in meeting.  But they were parties to the agreements and not the other members.  I therefore hold that the 4th defendant was not privy or a party to the provisional and formal agreements.  But on the facts of this case, his consent to the sale did contribute to the making of the agreements.

154.  Ms Chang had given the blank forms to Tse for delivery to the managers of the 1st defendant.  Those forms when duly completed would be used for applying for consent from the District Officer.  Those forms were for making the September Minutes, the Managers’ Application, the Members’ Application and the List of Members.  The plaintiff through Tse was aware that the 1st defendant had to hold a meeting to decide whether to sell the Lot.  Tse was also aware of the need for consent from the District Officer for the sale to be completed. 

155.   The 2nd defendant agreed that he and the 3rd defendant had no right to sell the Lot unless all members consented to the sale.  He knew that if he and the 3rd defendant should go ahead to sell without the members’ consent, the members could object to the District officer to block the sale.  He also said that it was necessary to have the September Minutes for showing to the plaintiff that he and the 3rd defendant had the power to sell.  This document was also necessary for showing to the District Officer in applying for consent. 

156.  The 3rd defendant also agreed that he could not have sold the Lot without the agreement of all members.  He also agreed that to produce the September Minutes with signatures was to show that all members had agreed to the sale.

157.  The 4th defendant said that he was aware that the 1st defendant would be selling the Lot as he had signed the September Minutes and agreed with the sale.  He regarded his signature on the September Minutes as his authority for Chi Hung to carry on with the sale of the Lot though the agreement to sale and the resolution had not yet been recorded in the September Minutes when he signed his name there.  He also expected Chi Hung to carry on with the sale and did not think it necessary to have a further meeting after Chi Hung had concluded the negotiation of the sale with the purchaser.

158.  It is thus clear that the plaintiff and the 2nd to 4th defendants regarded the consent (as signified by the signing in the September Minutes) important for the making of the provisional and formal agreements.  If the 4th defendant did not give his consent, no agreement would have been made.  The 4th defendant knew that the consent of all members was the authority that the 2nd and 3rd defendants required to enter into an agreement of sale.

159.  Counsel for the 1st to 3rd defendants referred to Light Ocean Investments Ltd. V. Enway Development Ltd. [1994] 3 HKC 31 and submitted that the formal agreement was just a conditional agreement.  I think counsel referred to the formal agreement as one that was subject to a condition precedent (see Chitty on Contracts 30th ed. para. 2-149).  However, that does not mean that a party having entered into an agreement subject to a condition precedent can turn around to sabotage it without any reason.  On this point, I refer to para. 2-153 of Chitty:

“2-153            Duty not to prevent occurrence of the event.  A third possibility is that, before the event occurs, the main obligations have not accrued; but that in the meantime neither party must do anything to prevent the occurrence of that event.  …”

160.  The 4th defendant’s objection to the District Officer was a derogation of his authority to the 2nd and 3rd defendants to enter into the formal agreement with the plaintiff.  He gave no reason to explain why he could have done so.  His pleaded reason of duress by Chi Hung was effectively abandoned by his evidence.  He also regarded the transaction at the agreed price a fair one.  He only made the objection when his son To Luen Hing wanted him to do so (see witness statement of To Luen Hing).  But that is not a good reason for the derogation of authority. 

161.  The formal agreement was made pursuant to the consent of all members present at the meeting including the 4th defendant.  The consent was relied on by the 2nd and 3rd defendants as well as the plaintiff in making the formal agreements.  I hold that the 4th defendant is obliged to the plaintiff and the 2nd and 3rd defendants not to do anything to block the granting of consent by the District Officer without good cause.  His objection lodged with the District Officer on about 7 January 2005 was without good cause and thus a wrongful one. 

162.  The 4th defendant has therefore lost his defence.  I hereby order him to withdraw from the District Officer the objection he lodged on about 7 January 2005 and the objection is deemed to have been withdrawn.  

163.  Counsel for the plaintiff also relied on estoppel by convention as against the 4th defendant (see Siegfried Adalbert Unruh v Hans-Joerg Seeberger [2007]2 HKLRD 414).  However, I do not think this is a valid argument as the 4th defendant was not a party to the agreements. 

Did To Luen Hing in or before January 2005 have a beneficial interest in and was a member of the 1st defendant and could object to the sale?

164.  I have already summarized the evidence of the 2nd defendant on eligibility of membership of the 1st defendant above.  His evidence is confusing.  He shifted grounds a number of times.  He was prepared to accept any suggestion that counsel for the 4th defendant might put to him.  He even included his mother and wife as those who were entitled to share the benefits of the 1st defendant.  However, even if I believe him that he had indeed shared the benefits with his mother, wife and sons, I still do not accept that his sharing was pursuant to any rule or rule of eligibility of the 1st defendant.  The simple reason is that if he did not undertake the sharing or just shared the benefit with some but not all the members of his family, no one would bother.  The 1st defendant or its members would do nothing to compel the sharing.  The 1st defendant would also not make distribution directly to anyone allegedly entitled but is deprived by his head of family.

165.  Though the 3rd defendant did not cast as wide a net on eligibility and restricted that to males of the family, his evidence was also that if any member should refuse to share the benefits with the eligible ones in his family, the 1st defendant would take no action to compel sharing. 

166.  I also think that the evidence of what the 2nd and 3rd defendants did when they were trying to obtain the District Officer’s consent was more reliable.  There was then no dispute between the 1st defendant and the plaintiff and all parties (save the 4th defendant) were trying to accomplish the sale.  There was then no need for them to adjust their evidence for fighting any battle.  I think they had at that time conducted themselves in a bona fide manner. 

167.  Both the 2nd and 3rd defendants have signed the Managers’ Application dated 25 October 2004.  The Application contained a certificate saying: “I certify that all members agree to the above application.  Members list duly completed and attached herewith.”  There was a List of Members annexed to the Application.  The list contained 16 names.  The names of Madam Ko and Siu Shui Fat were not there.  But these were made good by two later lists. 

168.  The 2nd defendant admitted that when he signed the Managers’ Application in October 2004 and the Confirmation Letter in January 2005, he believed that all members of the 1st Defendant had agreed to the sale.  He also agreed that he had to put in a Members’ Application that contain all the names of the members.  The missing names of Madam Ko and Siu Shui Fat were made good by later Members’ Applications signed by them and submitted to the District Officer on about 9 November 2004 and 20 January 2005 respectively. 

169.  The 2nd defendant also knew that the Full List of Members was to be enclosed in the Confirmation Letter.  He said the Full List was compiled by Chi Hung and he thought it was a complete list.  I do not think there was any reason for Chi Hung to have lied to him or to have left out a large number of the members from the Full List deliberately or otherwise.  Chi Hung was keen to see the sale to be completed.  But on the oral evidence of the 2nd defendant, the number of members was very much larger than 18 as contained in the Full List.  He also alleged that he was representing 11 members in his family.  A list prepared by counsel for the 1st to 3rd defendants also showed that there were 17 married sons of the various households who had not been included in the Full List.  If the 2nd defendant’s oral evidence was right, then Chi Hung had failed miserably in his task of preparing a full list.  But I cannot see how Chi Hung could have failed so badly.  He could have identified many of the married sons by enquiring with his fellow members.  But he included none save one son of Madam Ko.

170.  I also note that the Full List showed that some shares were owned by several persons, but they were of a common grandfather or father.  I think they are cases of several sons succeeding to one share (or two shares in the case of the 2nd defendant) upon the death of the father.  There was no case of a married son appearing together with his father.  The only member whose married son’s name appeared in the list was Madam Ko.  She was also the only person who seemed to be illiterate as she signed by drawing a cross and affixing her chop mark.  She has two sons, but the name of the other son Chung Ka Kau was not included in this list.  Chung Ka Kau had signed his name in the minutes of a meeting of the 1st defendant held on 11 March 2007.  The minutes of the other meetings of the 1st defendant including the September Minutes were signed by the other son Chung Chi Loy.  Madam Ko had not signed any of the minutes.  It seems that Madam Ko was always represented by one of her sons in attending to the affairs of the 1st defendant.  I doubt whether she was sharing her benefits from the 1st defendant with either of her sons.

171.  It was also because the 2nd defendant thought that all members had been listed in the Full List, he therefore guessed that the objector was an outside troublemaker.  That explained the terms of the Confirmation Letter that he signed.  He denied authorship of this letter, but admitted knowledge of the contents when he signed.  His then conduct speaks much louder than what he said in the witness box.

172.  The 3rd defendant also said that Chi Hung had told him to register the members in case of objection from someone to the sale.  He also said Chi Hung had told him that the Full List contained all members.  He trusted Chi Hung and signed the Confirmation Letter without reading the Full List.  He also intended the Full List to be a full list. 

173.  The Full List was indeed an important document.  It was for the purpose of informing the District Officer that all members of the 1st defendant had already agreed to the sale and the objector was not one of them (as they then thought).  They wished to convince the District Officer that they already had the unanimous consent and the consent should be given.  There was no reason for Chi Hung and the 2nd and 3rd defendants not to give the district Officer a full list of members in so far as they knew.

174.  In the premises, I hold that the Full List was a list of all the members of the 1st defendant on or about 18 January 2005.  I disbelieve the 2nd and 3rd defendants in so far as they suggested that there were any other member of the 1st defendant apart from those in the Full List.  They lied in order to protect/assist their fellow villagers the 4th defendant and his son To Luen Hing. 

175.  I hold that To Luen Hing was not a member of the 1st defendant and was not entitled to any benefit of the 1st defendant in January 2005.  He also did not have any right to advise the District Officer of his objection to the sale.  The fact that he together with his brothers will one day succeed to his father’s share is neither here nor there.  That does not make him a member or beneficiary of the 1st defendant or confer him the right to lodge an objection to the sale to the District Officer.  The 1st defendant therefore failed in its defence by relying on the objection of To Luen Hing. 

176.  The 4th defendant maintained that he was entitled to rely on the objection of To Luen Hing despite my view to contrary.  Now that I have held against the alleged membership of To Luen Hing, the 4th defendant also cannot rely on it in defence of the plaintiff’s claim.

177.  I also do accept the notion that there are people who are entitled to share the benefits of the 1^stdefendant but are not its members.  I say this to cast away any suggestion that there could be any non-member beneficiary of the 1st defendant.  There were some hints of the existence of this distinction in the evidence, but such evidence, to say the least, was confusing.

 Was there any misrepresentation by the 2nd, 3rd and 4th defendants?

178.  Since I have held that the Full List contained all the members of the 1st defendant on about 18 January 2005, there was as a matter of fact no misrepresentation by the 2nd, 3rd and 4th defendants.  I therefore dismiss this claim of the plaintiff.

 Whether the formal agreement is still effective without rectification?

179.  Since I have held that the objections by the 4th defendant and To Luen Hing were wrongful.  They were and are of no effect.  But the objection of the 4th defendant has since about 7 January 2005 been blocking the grant of consent by the District Officer.  That was 9 months and 17 days before the expiry of one year from the making of the formal agreement.  If I should hold that the formal agreement had already cancelled automatically pursuant to its clause 35(3), I would be giving blessing to the wrongful objection of the 4th defendant.  That would be wrong. 

180.  I hold that time should not have run from 7 January 2005 until today for the purpose of the one year period in clause 35(3).  The automatic cancellation under clause 35(3) has therefore not taken place yet.  I also dismiss the counterclaim of the 1st, 2nd and 3rd defendants. 

181.  The 1st defendant may now seek the consent from the District Officer again.  If the District Officer should consider the application for consent on the basis of the materials before him at the material time, he can disregard the objections by the 4th defendant and To Luen Hing.

Others claims

182.  The plaintiff also claims compensation under clause 23(2) of the formal agreement.  Clause 23(1) and (2) provide:

“23. (1) No error, omission or misstatement herein or in any plan furnished or any statement made in the course of the negotiations leading to the contract shall annual the sale or entitle the Purchaser to be discharged from the purchase.

(2) Any such error, omission or misstatement shown to be material shall entitle the Purchaser to proper compensation, provided that the Purchaser shall not in any event be entitled to compensation for matters falling within clause 6(3) or 18 hereof.”

183.  The plaintiff has not shown how this clause is relevant to any claim of loss.  I dismiss this claim. 

184.  The plaintiff also claims specific performance of the formal agreement.  I have pointed out at the start of the trial that I have no power to grant such relief as performance of the formal agreement depends on the consent from the District Officer.  However, the plaintiff persists in this claim.  I think this is utterly unreasonable.  I dismiss it.

COSTS ORDERS NISI

185.  I make the following costs orders nisi. 

186.  The plaintiff has succeeded against the 1st defendant on the claim to maintain the force and effect of the formal agreement, but lost the claim for rectification.  The claim for rectification has taken up a substantial portion of the time for the trial.  I order that the 1st defendant do pay the plaintiff 70% of the costs of this action in so far as the 1st defendant is concerned. 

187.  The 1st, 2nd and 3rd defendants have lost their counterclaim and I order them to pay the plaintiff the costs of their counterclaim.

188.  The 2nd and 3rd defendants have succeeded in their defence of the claim of misrepresentation, but that is because I disbelieved them.  I therefore make no order as to costs in the action in so far as this claim is concerned.

189.  The 4th defendant has lost his defence save the misrepresentation claim.  I order him to pay the plaintiff the costs of the action except for the misrepresentation claim in so far as he is concerned.  I make no order as to costs for the misrepresentation claim against him.

190.  I do not think it necessary to make any order of costs for the plaintiff’s claim under clause 23(2) of the formal agreement or for specific performance of this agreement as practically no time was taken up by these claims.