PANG SAI YU the manager of “PANG SHE YAN TSO” v. WINNER DAY INVESTMENT LTD AND OTHERS

HCMP 788/2014

[2024] HKCFI 548

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 788 OF 2014

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J U D G M E N T

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INTRODUCTION

1.  This action concerns a piece of land in Fanling, New Territories. The land comprises two adjoining lots known as The Remaining Portion of Lot No 1399 (“Lot 1399RP”) and The Remaining Portion of Lot No 1402 in Demarcation District 91, North, New Territories (together, “the Lots”). The size of the Lots is about 38,000 sq ft.

2.  Pang She Yan Tso (彭思隱祖) (“the Tso”) is the registered owner of the Lots, which are held under a block crown lease. Both lots bear the description “Padi” in the lease.

3.  Being an unincorporated body, the Tso acts through its manager (司理), Pang Sai Yu (彭世裕) (“PSY”), in this action. The references to “the plaintiff” below should generally be taken to mean the Tso.

4.  In these proceedings, the plaintiff seeks to recover possession of the Lots from the 1^st, 2^nd, 3^rd and 4^th defendants. In addition, it seeks monetary and injunctive reliefs against them under different heads of claims.

5.  On day seven of the trial, the claim and counterclaim as between the plaintiff and the 3^rd defendant were settled. A Tomlin order was granted to stay those proceedings permanently save for enforcement of the settlement.

6.  Hence this judgment is only concerned with the disputes between the plaintiff and the 1^st, 2^nd and 4^th defendants. The references to “the defendants” below should generally be taken to mean these three defendants, except otherwise stated.

7.  From 2006 and up to now, the Lots, save for a portion of Lot 1399RP which the 3^rd defendant has occupied (which area is about 13% of the Lots), has been used as a car park. According to the defendants’ case, the 2^nd defendant conducted site formation works at the Lots from 2006 to 2008 in different phases. From 2008 onwards, the car park has been operated by the 1^st defendant. At all times, the 4^th defendant is the sole director and shareholder of the 1^st defendant. He is in de facto control of the 1^st defendant.

8.  It is the plaintiff’s case that all along it had no knowledge that the Lots were put to such use and it only made the discovery in 2013. It had never authorised or given consent to any of the defendants to occupy or use the Lots. The plaintiff says that since 2006, the defendants have exclusively occupied the Lots without its consent.

9.  In April 2014, the plaintiff commenced the present proceedings against the 1^st defendant by originating summons under Order 113 of the Rules of the High Court, seeking to recover possession of the Lots from it and all other occupiers.

10.  Shortly afterwards, in May, the 2^nd and 3^rd defendants were joined as parties. They claimed that they are lawful occupiers pursuant to tenancy agreements.

11.  In February 2015, the proceedings were ordered to be continued as if they were begun by writ.

12.  In October 2018, on the plaintiff’s application, the 4^th defendant was joined.

13.  The 2^nd and 4^th defendants are members of the Tso. The 4^th defendant was an officer (值理) of the Tso from March 2006 to June 2013. This period broadly coincides with when the Lots were being used as a car park up until the Tso’s alleged discovery of such use.

14.  In summary, the plaintiff pursues the following causes of action against the defendants:

(1)  Trespass against the 1^st, 2^nd and 4^th defendants;

(2)  Breach of fiduciary duties by the 4^th defendant; and

(3)  Dishonest assistance and/or knowing receipt against the 1^st and 2^nd defendants.

15.  In addition to possession and injunctive reliefs, in the prayer, the plaintiff seeks damages for (1) above and, further or alternatively, damages and/or equitable compensation and accounts for (2) and (3) above. Mr Duncan Ho, appearing with Ms Yvonne Leung for the plaintiff, confirmed in closing submissions that should the plaintiff succeed in all the causes of action, it would elect to seek damages for trespass against the defendants jointly and severally as remedy. The damages calculated from 1 January 2006 up to 31 December 2022 amount to $40,350,600 or, alternatively, $8,404,200, and from 1 January 2023 damages would accrue at a monthly rate of $304,500 or, alternatively, $66,120. The first alternative is calculated based on the market value of the Lots if used as car park and the second alternative is calculated on the basis that they are put to agricultural use.

16.  On the other hand, the defendants contend that in late 2005, the Tso granted an oral lease of the Lots to the 2^nd defendant at an annual rent of $1,000, together with a yearly option to renew. The oral agreement was reached in a conversation between Pang Kwan Cheung (彭坤祥) (“PKC”), a manager acting on behalf of the Tso, and the 2^nd defendant. The lease commenced on 1 January 2006. In late 2006 and each subsequent year (until late 2012), the 2^nd defendant exercised the option and paid the Tso the annual rent. Between 2006 and 2008, the 2^nd defendant incurred a total sum of $702,000 on site formation works on the Lots and operated a public car park there. In 2008, the 2^nd defendant sub-leased the Lots to the 1^st defendant. PKC was informed and he gave his consent to the arrangement. Since then, the 1^st defendant has continued to operate the public car park on the Lots up to the present. In late 2013 and late 2014, the 2^nd defendant exercised the option to renew the oral lease by depositing the annual rent to the Tso’s account. However, the Tso wrongly refused to accept them.

17.  In the circumstances, the defendants say that they are not trespassing the Lots. Furthermore, the 4^th defendant was not in breach of any fiduciary duties owed to the Tso. And there was no dishonest assistance and/or knowing receipt on the part of the 1^st and 2^nd defendants as alleged.

18.  The defendants also say that the Tso is now estopped from denying the 2^nd defendant’s right to renew the oral lease as it had induced, encouraged or caused him to believe that he would be able to continue to use the Lots as before and in reliance he acted to his detriment by investing in the site formation and other improvement works.

19.  In the premises, the defendants say that the Tso is in breach of the oral lease. The 2^nd defendant counterclaims specific performance or damages. Further or alternatively, the plaintiff has been unjustly enriched as a result of the site formation works and other improvement works carried out at the Lots by the 2^nd defendant. He counterclaims the sum of $702,000 under restitution.

20.  The primary factual dispute in this action is whether there was indeed the oral lease as alleged by the defendants. The material events span from late 2005 to 2013.

21.  The milestone events in the defendants’ case include the alleged oral conversation between PKC and the 2^nd defendant in late 2005, and the alleged consent given by the former to the latter concerning the sub-lease in 2008.

22.  The material events which the plaintiff rely on are the Tso meetings held on 16 March and 9 June 2013, at which the 4^th defendant was being confronted about the defendants’ use of the Lots as a car park. I shall refer to the meetings as “the March 2013 meeting” and “the June 2013 meeting”.

23.  The plaintiff called three witnesses to testify at the trial:

(1)  PSY;

(2)  Pang Wai Man (彭威文) (“PWM”) – he was the officer of the Tso since 2014. He gave evidence on the custom of the Tso and what happened at the June 2013 meeting;

(3)  Pang Wai Kwok (彭偉國) (“PWK”) – he is a member of the Tso. He also gave evidence on the same matters covered by PWM.

24.  The defendants called two witnesses – the 2^nd and 4^th defendants.

25.  In addition to the oral testimonies, the key documentary evidence in this trial comprises (1) minutes of meetings held by the Tso (“the Tso minutes”), (2) its accounting records showing the income and expenditure (進支總簿 or 進支數簿) from about 2005 to 2013 (“the accounting books”), and (3) a transcript of the June 2013 meeting.

26.  With leave of the court, the parties have adduced expert valuation evidence on the market rental of the Lots from 1 January 2006 to 28 February 2020. The evidence would be relevant if the court upholds the plaintiff’s trespass claim. At trial, counsel for both sides confirmed that they did not require the experts to give oral testimony.

27.  Before turning to the evidence, I must first deal with a last-minute application taken out by the defendants challenging the plaintiff’s standing to sue. (That application was taken out by all four defendants but it was also disposed of as between the plaintiff and the 3^rd defendant in their settlement.)

28.  The pre-trial review hearing was initially fixed for 24 February 2022. (The hearing was vacated due to the COVID-19 pandemic and adjourned to 27 April 2022.) Just one week before the original PTR date, the defendants took out a summons on 17 February 2022, seeking, among other things, to strike out the proceedings on the ground that after the passing away of PKC, PSY had no authority to continue the plaintiff’s claim. With leave of the court, the summons has since been amended.

29.  At the re-scheduled PTR hearing, I gave directions for the filing of evidence and adjourned the amended summons to be dealt with on the first day of the trial, ie 18 May 2022. I also gave liberty to the plaintiff to take out an application to substitute the plaintiff by 4 May 2022.

30.  The plaintiff proceeded to issue a summons applying for PSY to be added as a 2^nd plaintiff on behalf of himself and representing all members of the Tso except the 2^nd and 4^th defendants.

31.  I heard arguments on both summonses on the first day of the trial and reserved my decision.

THE TWO SUMMONSES

32.  I first set out the factual background relevant to the defendants’ amended summons.

Factual background

33.  In 1978, PKC became a manager of the Tso registered with the Home Affairs Department. In 2004, PSY became another registered manager. From that time onwards, PKC and PSY had been the two managers of the Tso.

34.  In April 2014, PKC and PSY as managers commenced the present proceedings on behalf of the Tso. In the title, the plaintiff was stated to be PKW and PSY being “the managers of the [Tso]”.

35.  In August 2016, PKC suffered from a stroke.

36.  On 15 October 2016, the Tso held a meeting to discuss the litigation concerning the Lots. It was unanimously resolved that PSY, manager, be authorised to handle the litigation and to appoint solicitors. The minutes read:

“大會一致通過授權司理人彭世裕全權處理官司和律師聘任。”

37.  In a number of subsequent meetings held by the Tso, the issue of the managers was discussed.

38.  On 6 November 2016, PSY announced that he would resign as manager and would continue to assist in the Tso affairs until the end of the financial year. The minutes read:

“彭世裕宣報辭任思隱祖司理，直至本財政年度完結。會繼續協助祖務。”

39.  On 15 January 2017, it was resolved that PWK would succeed PSY as manager. The minutes read:

“偉國承傳世裕司理職位。”

40.  On 5 March 2017, it was resolved that PWK and another member named Pang Ting Fung (my transliteration) be added as new managers. The minutes read:

“增加偉國及廷峯為新任司理。”

41.  In October 2017, PKC passed away.

42.  On 1 April 2018, another Tso meeting was held. The minutes recorded the following: “succession of managers: PWK, Pang Yu Kai and Pang Ting Fung. Note: Pang Yu Kai requires notice awaits confirmation” (the plaintiff’s translation). The original text read:

“司理承傳：偉國、宇溪、廷峯、(備註) 宇溪要告示等候確認”

43.  Notwithstanding the above, after PKC passed away in October 2017 and up to the present, PSY remains to be the only manager registered with the Home Affairs Department.

44.  In April 2018, the plaintiff took out a summons seeking to (1) amend the title of the plaintiff from PKC and PSY as the managers to only the latter as the manager, and (2) add the 4^th defendant as a party and amend the statement of claim mounting various claims against him.

45.  At the call-over hearing, the solicitors then acting for the defendants, confirmed that they would not oppose the application to amend the title but would oppose the joinder application. Directions were then given for the filing of evidence in respect of the latter.

46.  At the conclusion of the substantive hearing held on 3 October 2018, master allowed both applications.

The defendants’ amended summons

47.  The defendants put forward two main grounds for striking out.

48.  First, as revealed by the Tso minutes, since 15 January 2017, PSY is no longer a manager by reason of his resignation. Hence he does not have the authority to represent the Tso to continue with these proceedings and to apply to join the 4^th defendant as a party.

49.  Mr Jeremy Cheung, appearing with Ms Kwok Sin for the defendants, further submits that the resolution of 15 October 2016 does not assist the plaintiff as PSY was authorised to conduct the litigation by virtue of his office as manager. Following his resignation and his being succeeded by PWK, the authorisation lapsed.

50.  Second, even if he has at all times remained to be a manager, after the death of PKC in October 2017, he, acting singly, does not have the authority to represent the Tso. In this regard, he draws support from the decision in Mak Lai Chuen v Lau Kar Yau [2009] 3 HKC 217.

51.  In paras 22, 24, 26 and 33 of the judgment, the judge accepted the evidence of the Chinese customary law expert to the following effect:

(1)  Chinese customary law requires managers to act jointly and unanimously.

(2)  Where a Tso has appointed two managers, upon the death of one of them, the surviving manager does not become the sole manager and has no authority to act alone.

(3)  This is because each of the two managers was appointed as a co-manager and has one-half of the authority to act only. Upon the death of one manager, his one-half power would not automatically transfer to the surviving manager. Such automatic transfer would contradict the original decision of the Tso to have two managers appointed and acting together.

(4)  Therefore, when a manager dies, a replacement manager must be appointed. Alternatively, the Tso may decide not to replace the deceased manager and to have only one manager appointed. But, importantly, the Tso has to make a decision to that effect.

52.  In the present case, after the passing of PKC, the Tso has never resolved to appoint PSY as the sole manager. Hence, he does not have the full power to represent the Tso in these proceedings. This also means that he did not have the power to apply to join the 4^th defendant as a party back in 2018. Mr Cheung submits that the decision to sue the 4^th defendant, a member of the Tso, is a very important decision which must be decided not by PSY as a matter of routine but by the Tso members as a whole.

53.  Under either of the above two grounds, PSY has no standing to bring the Tso’s claims against the defendants. Hence, they contend that the claims should be struck out.

54.  In their amended summons, the defendants also seek leave to appeal against the master’s decision made on 3 October 2018 out of time on the same grounds.

55.  This is clearly a very late application. The defendants’ explanation is that they have previously appointed a number of law firms in these proceedings and that their previous solicitors did not inform them of the plaintiff’s application to amend the title or advise them that PSY lacks the standing to sue. It is in fact their current solicitors who have informed and advised them of the same.

Discussion

56.  The plaintiff has put forward a number of arguments to oppose the striking out and leave to appeal applications. For reasons which I shall set out shortly, it is not necessary to set out the arguments in full.

57.  In respect of the first ground, the plaintiff says that notwithstanding the contents of the minutes of the meetings held on 6 November 2016, 15 January 2017, 5 March 2017 and 1 April 2018, PSY has all along remained as manager of the Tso and no other members have been appointed to that office.

(1)  It is explained in the plaintiff’s opposing affirmations that when members of the Tso were named as new managers in the minutes, the intention was that they were merely nominated as candidates for the office of the manager and that the appointment would only become effective after signatures of consent from at least 75% of the members are obtained and after they are registered with the Home Affairs Department. None of the candidates have satisfied the two conditions. They have therefore not been appointed as managers.

(2)  In fact, in a meeting held on 7 January 2018, it was recognised by the members that PSY would continue to act as the manager.

58.  In respect of the second ground, Mr Ho submits that the decision in Mak Lai Chuen on Chinese customary law is a decision on foreign law and is not binding on this court. The decision may well be revisited with evidence from other experts. The plaintiff adds that because of the extreme lateness of the defendants’ amended summons, it has been deprived of the opportunity of adducing expert evidence in this regard.

59.  The first ground involves a factual dispute as to whether PSY had in fact resigned from the office of the manager and been replaced by other members. It turns on whether the intention of the Tso members as alleged by the plaintiff is true. It is simply impossible for the court to resolve this factual dispute on affidavit evidence alone. As to the second ground, I would be inclined to agree with Mr Ho’s submission.

60.  However, it is unnecessary for me to make any ruling on the two grounds because of a development which took place after the defendants took out their summons.

61.  On 15 May 2022, that is the Sunday immediately before the trial commenced, the Tso held a meeting. The 2^nd and 4^th defendants were present. At the meeting, it was resolved to confirm, and if necessary to ratify, that (1) PSY has been fully authorised to conduct these proceedings against the 1^st to 4^th defendants, and (2) PSY has remained as the manager since 2016 and all the nominations of managers in the meetings in 2017 and 2018 would only be effective after they have been registered with the Home Affairs Department.

62.  The minutes of the meeting read:

“(一) 再次確認，彭世裕獲授權代表本祖全權處理高等法院HCMP 788/2014對四名被告 日勝投資有限公司、彭國權、何景才及彭應佳 要求交出Lot 1399RP及Lot 1402RP土地管有權及追討賠償等的案件；為免不必要的爭議，對彭世裕之前在該案中所作的一切決定，亦一概予以追認。

…

(二) 確認彭世裕 (如有需要亦追認) 自2016年起直至現在，一直擔任本祖司理，及於2017年1月15日、2017年3月5日及2018年4月1日的會議中通過的司理人選，須在成功獲民政事務局局長委任後才正式生效。

…”

63.  At the hearing, no issue was raised as to the validity of the meeting or the resolutions.

64.  As such, the Tso has now spoken in plain and clear terms that PSY in fact has the standing to conduct these proceedings on its behalf at all times.

65.  I should therefore dismiss the defendants’ amended summons.

The plaintiff’s summons

66.  As PSY has standing to represent the Tso, it is unnecessary to consider the plaintiff’s application for representation order. I make no order on that application.

Costs

67.  I make an order nisi that the plaintiff do have costs of both the defendants’ amended summons and the plaintiff’s summons including all reserved costs, to be taxed on an indemnity basis if not agreed, with certificate for two counsel.

68.  As regards the defendants’ amended summons, it is an extremely late application, it being taken out only one week before the original PTR hearing.

69.  It is well-established that where a defendant seeks to challenge a plaintiff’s standing to sue, he should do so at the outset. In the present case, the challenge ought to have been made in 2018 when the plaintiff applied to amend the title in this action. The defendants’ explanation for the delay is inherently incredible. Even if the court is to accept that they only found out about the standing issue after they instructed their current solicitors, it must be pointed out that the latter came on board back in January 2021. However, the application was not made until one year later in February 2022.

70.  The delay itself is extraordinary. As it turns out, the Tso has managed to pass the resolutions just before the trial to completely lay the standing issue to rest. Had the defendants raised the issue promptly, it could have been resolved much earlier on and not on the eve of the trial. Since February 2022, the time which ought to have been spent on the preparation of the trial had been diverted to dealing with the defendants’ amended summons, including the filing of affidavit evidence and the actual holding of the Tso meeting. That is significant prejudice to the plaintiff. In my view, an indemnity costs order is plainly warranted.

71.  As for the plaintiff’s application, it is no doubt an attempt to ensure that the trial could proceed as scheduled and not be derailed by the defendants’ last-minute application. While I make no order on the plaintiff’s summons, I consider that the defendants should similarly bear the costs as it was necessitated by their own application.

THE PLAINTIFF’S CASE

72.  The plaintiff’s case is as follows.

The custom and practices of the Tso

73.  The Tso owns many plots of agricultural land in the New Territories.

74.  It is not disputed that only the managers of the Tso have the authority to manage its properties and assets, including entering into leases with or granting licenses to third parties.

75.  The officer of the Tso is responsible for the daily operation and safekeeping of the properties, assets and records of the Tso, including collecting rentals, making and safekeeping records of all income and expenditure. The officer is not authorised to enter into any lease or grant any licence on behalf of the Tso in respect of its landed properties.

76.  The records would include the accounting books and the lease booklets (租客租簿).

(1)  The rentals received under the leases granted by the Tso would be entered into the accounting books.

(2)  When a lease of agricultural land is granted, a lease booklet would be prepared in duplicate copies, with the Tso and the tenant each keeping one copy for records.

77.  The officer owes the following fiduciary duties to the Tso:

(1)  to act in good faith;

(2)  not to use the properties and assets of the Tso for his own benefit or the benefit of a third person;

(3)  not to place himself in a position where his duty to the Tso conflicts with his own interests; and

(4)  in the event of any potential conflict of interest, to ensure that the Tso is fully informed of the same and the implications.

78.  The Tso holds its annual worship day on the fifth day of February in the lunar calendar, which would usually fall in March of the year. Members of the Tso would gather together for worshipping (祭祀) and auditing of the Tso records (核數).

79.  During the auditing, a member would read out the income and expenditure entries with respect to the Tso’s lands for that year. However, since the Tso owns many lands, it is the evidence of both PWM and PWK that members would not remember who the tenants are or where the leased out lands are located. After hearing the income and expenditure report, the members would proceed to agree on the division of proceeds for that year.

The alleged oral lease

80.  In late 2005, ie around the time when the oral lease alleged by the defendants was granted, PKC and PSY were the two managers of the Tso. It is PSY’s evidence that he never granted the oral lease, he had no knowledge of it, and he did not know that the Lots were being occupied by the defendants or used as a car park.

81.  Where a Tso has more than one manager, the co-managers must act unanimously. Lease entered into by only one of the co-managers are not valid and binding. This is sometimes referred to as the unanimity principle: see section 15 of the New Territories Ordinance, Cap 97; Tang Kam Wah v Tang Ming Yat HCA 10141/1998, 26 November 2002 at para 72.

82.  Mr Ho submits that on the defendants’ pleaded case, the oral lease was granted by only PKC. Applying the unanimity principle, the oral lease, even if it existed, would not be binding on the Tso. This is fatal to the defendants’ case.

83.  In any event, the plaintiff says that the oral lease did not exist as a matter of fact.

Discovery in the March 2013 meeting

84.  It is PSY’s evidence that he had no knowledge of the defendants’ use of the Lots until the March 2013 meeting.

85.  At that meeting, some members of the Tso confronted the 4^th defendant about the use of the Lots as a car park and the use of two other plots of agricultural land at Lots 2414 and 2415 by him as a flea market.

86.  Those members queried whether the 4^th defendant had by himself or by his company take over those lots as tenant and converted the agricultural use without the prior consent of the Tso and without reporting to the Tso.

87.  In the meeting, the 4^th defendant admitted that he leased out the Lots and the other piece of land to himself to operate a car park and a flea market respectively and the leases had been renewed for another five years. Some members pointed out that the unauthorised change of uses of the lands was illegal and the managers might face prosecution for that. They demanded the 4^th defendant to return the lands to the Tso. But he refused.

88.  This led to the holding of the June 2013 meeting.

The June 2013 meeting

89.  The focus of the June 2013 meeting was the unauthorised use of the Lots and the other piece of land by the 4^th defendant and the potential criminal liability that might flow from such use for the Tso or its managers.

90.  At the meeting, with respect to the Lots, the 4^th defendant admitted that they had been developed by him and the 2^nd defendant together as a car park since 2006. He admitted that he leased out the Lots without the agreement of the managers and the Tso and he would bear all responsibilities for the illegal act. He accepted that he had handled the leases improperly and negligently and apologised to other members. Upon further queries, he indicated that he would be willing to pay rental to the Tso or to return the lands.

91.  Furthermore, both PKC and PSY said that they had not known about the defendants’ use of the Lots.

92.  A transcript of the meeting is produced in this trial as evidence.

93.  The following are extracts of the relevant parts. “佳”, “裕” and “坤” are the 4^th defendant, PSY and PKC, respectively. In the meeting, the Lots were described as the land next to the PTU headquarters.

“佳： …… 即係由於我阿佳呢即係年紀尚輕 可能處理呢個公家嗰個經驗 事務係唔足夠嘅阿 所以係租用呢兩幅公家土地上面呢 以慣常下做事的方式去做 咁其實原來好多地方係唔恰當嘅 希望大家多多見諒同埋包容 …… 最後係呢一幅地公家亦都冇出過一分一毫 咁我係同阿權一齊去開發去投資 咁阿令到一幅呢完全冇咩價值的地到而家呢刻都係有一個收益的土地 咁我首先強調一點 我地的出發點真係當回本之後 我地會回饋返比公家當然租金亦都會大幅提昇 而家嗰個阿機動部隊隔離幅地係八千蚊一年 而清河邨對面嗰個地係一萬二千蚊一年 咁我地預計五年之後回本呢租金會大幅調升到十倍至二十倍 咁當然要睇返嗰收益而定 …… 我地亦都係租用咗呢幅地 如果公家日後須要賣田賣地的時候 我地第一時間無條件攞返出嚟 係嗎 亦都令到可能有一幅冇咩價值既地而家提升到有收益的地 …… 咁我就希望呢 租用咗之後 就算有咩部門係牽涉到公家或者兩位司理人呢 我地都係同阿國權一力承擔 就唔關係公家同祖堂的事 咁我亦都有啲相由呢兩幅地點樣由一幅荒地去伸延到而家呢刻個情況 ……

裕： …… 第一 今日呢就想講下呢 二零一二年阿佳簽咗嗰個續約嗰條件 即係之前嗰幾年呢 我係唔知既 但係嚟講既話呢 後期呢到度知道嗰陣2012年阿佳呢自己私自簽過5年合約呢 仲有冇效 同埋跟著跟進既話呢 要取消呀是終止呀 咁哩樣第一點 …… 2012 年呢私自簽嗰個租約呢而係兩位司理人呢係唔知情況下呢 咁去續咗五年呢 繼續是否生效抑或終止抑或取消點點點呢 而家就傾呢個第一點先 希望大家俾啲意見

佳： 我表態先啦 我話取消啦好嗎 我表態我取消

……

坤： 嗱 好啦 希望大家吓 唔 即係我所知道既嘢呢就全部搬曬出嚟架啦 而家就 我係呢個思隱祖呢其中一個司理之一 咁呢嗱 政府呢 就長話短說啦 唔洗講咁多 其他既嘢啦 咁阿收咗而家呢清河村收咗幾千萬呢就已經分配俾大家架啦 咁阿好啦 事到而家呢呢個訓練營既附近呢 果幅地呢亦都係呢收咗部分 而係剩落既呢我所知 就係呢個何景財以前呢就耕落我地公家呢幅農地呢 用嚟做農地使用既 咁阿後期呢 咁而家講4年前呢 嗱 阿佳哩曾經係我面前提過一句 佢話 坤叔 阿權話攞呢幅農地嚟做泊車好唔好呀 我話 好 咁呢就係一句說話啫 咁呢以後既嘢點樣做法點樣嘢呢 我就完全一蓋唔知啦 咁呢四年後至到今時今日第五年啦 就今年二月初五公家核算呢個祭祠就結數 亦都呢有啲兄弟呢就帶出呢個話題呢 就知道呢件事 咁就知道呢件事呢 咁我相信呢阿裕都唔知嘅 一樣唔知概 四年前既事即係我地兩個一樣唔知 嗱 講真話阿吓 而家大家面口坐係處唔會話點樣講邊一邊個壞話邊個阿乜乜啦 唔 咁阿好啦 咁呢啦呢個做法呢就已經成過去啦 係一個呢唔合邏輯做事嘅 呢個大家都知道啦 阿佳亦都頭先亦都向大家道咗歉啦

佳： 即係即係我唔識果啲規矩

……

坤： …… 阿佳亦都同意呢由呢一個開始今年概開始呢 已經係刪除架啦 唔當一種呢係合約式架啦 就重生呢係列入一種呢新例 一種新合約呢嚟到將來去進行 咁呢嗱 就所知道既嘢所做既嘢即係我兩個司理呢就係咁多啦 吓

佳： 總之陣間認為嗰個租金幾多 我接受得到咪接受 接受唔到既咪攞返出嚟

……

佳： Ok 機動部隊果度呢 06年就國泰交數俾我的時候阿國權已經落咗簿 呢度係寫清楚由國權租用啦

志恆：違法使用咗幾耐

佳： 06年開始泊幾部

志恆：06年開始

志恆：即係講緊七年架啦差唔多

佳： 係啦係啦 咁其實就生意既嘢唔係話一下子真係有咁多 係真係擺好多心血 心機 時間 落去管理 去營運 逐啲逐啲守起嚟

裕： 阿佳 我想澄清一樣嘢 我地租農地出去呢我地唔反對佢做任何行業 但係如果係違法既話呢 我地公家或者個司理人任何嗰個持分者呢係要負上法律責任既話呢

佳： 絕對唔容許 呢度一定要搞掂 絕對唔容許

裕： 咁即係梗係唔容許啦 咁嚟講既話呢 但係而家呢嗰個租用者呢就已經抵觸咗個法律責任就係話呢私自更改土地用途而無開大會 公家冇人知 司理唔知 政府冇申請過 首先呢度就係第一個point 已經唔唔唔啱啦

志恆： 我想問問租用者係你本人

佳： 呀 係我拍檔

志恆： 即係你有分

佳： 我有份嘅 係我有分

裕： 有份 但係個個簽租約個個呢 交田租個個呢又唔係你名喎

佳： 咁其實即係搵拍檔簽田租其實 即係或者落薄啫 好似阿池叔都唔使話咩租約啦 俾租咪得囉 咁總之有人認呢個地唔係俾外人霸佔咗 即係呢刻你問我我有冇否認過 我冇否認過 我真係自己落好多心血好多金錢

沛粦： 仲有一樣嘢我想問你呢 點解你之前你唔開會同啲兄弟傾傾 即係兄弟即係話o唔ok先麻

佳： 所以我就係失察咗呢樣嘢 真係唔好意思

沛粦： 呢啲嘢唔能夠自罷自為 大家都有份架麻啲嘢

佳： 因為我年紀尙輕 即係處理公家啲嘢我以為一般做法都係咁 真係唔好意思

滿池： 即係你呢又聽我講 亞公的地係農地 我攞亞公塊地呢係種菜種荔枝樹 係冇收益 絕對絕對要只有蝕本 將來有咩法律責任 打工負責俾番啲菜你 哪全叔 全叔 阿公果啲地呢係農地 我攞阿公啲地係種菜 係種荔枝樹 係冇收益嘅 係只有蝕本架 咁你而家攞嚟圖利 就應該俾多啲

佳： 絕對要

梅初： 如果阿公呢刻收返錢呢即係阿公承認咗呢個責任 將來有咩法律責任阿公負責 告都告司理 話俾你聽 告司理

裕： 嗱 阿池叔 果啲唔好講佢啦

未齊： 嗱 而家好簡單樣嘢 即係而家佢做開呢樣嘢 如果有咩行差踏錯呢 如果政府要檢控呢 就係司理人嘅事 就唔會搵你阿佳 因為佢兩個係司理麻 佢唔理你諗咩嘢 總之你果撻地租俾ABC君 總之你做咗啲嘢佢係違法嘅 你果撻地係做咗違法嘅 佢就告呢2個司理嘅啫 唔會話搵阿佳

佳： 真係唔好意思

貴枝： 第一呢 如果係法律上呢你自己唔經司理授權呢個租約係冇效

佳： 冇效

貴枝： 第2呢 你好易俾人誤會你係以權謀私 因為你值理阿麻 你值理你又租埋俾自己 咁唔理你你點投資點樣性 賺緊架麻

佳： 即係呢度我做錯咗 真係唔好意思 各位兄弟叔伯 唔好意思” (emphasis added)

94.  In the earlier part of the transcript quoted above, PKC recounted a conversation between him and the 4^th defendant about four years ago, which would be around 2009. In that conversation, the 4^th defendant asked him if the land could be used for parking and PKC said yes. But that was all that was said at that time. PKC expressly denied knowledge of any tenancy of the Lots. See the italicised part of the transcript.

95.  The 2^nd defendant did not attend the June 2013 meeting. The 4^th defendant explained that a granddaughter was just born to the 2^nd defendant. This is what he said:

“因為佢啱啱生咗個外孫女 亦都好尊重兩位司理人同大會嘅決定 係咪 咁總之如果大家認為呢刻阿可以接受容許繼續做呢盤生意嘅 咩租金一個月我能力負擔得起嘅或者我地做盤生意阿嗰個成本計算出嚟係合理嘅 大家亦都了解我哋淨係俾陀地費個筆費用都真係唔少架 唔係話一盤生意望落去就真係好似個天變出嚟係咁 經過好多艱辛好多時間去守 呢盤生意先成功”

96.  The 4^th defendant said that he would try to resolve the issue:

“即係我返去俾啲時間我 即係我真係做盤生意人哋真係俾咗錢落去投資 開頭架生意真係蝕本架 咁大家信唔信任都好 咁我都係攞個心出嚟 吓 我亦都用我最大嗰個誠意去同大家商討呢件事就唔係話呀喺度嘈呀咁大家唔合作即係我係攞最大嘅誠意希望大家解決件事 大家和氣生財大家好 阿坤叔”

97.  The plaintiff says that the 4^th defendant in fact admitted to his and the 2^nd defendant’s use of the Lots without the authorisation of the Tso.

After the June 2013 meeting

98.  On about 30 June 2013, the 4^th defendant, through his solicitors, tendered his resignation as officer.

99.  By letter dated 9 July 2013, the 1^st defendant’s solicitors issued a letter to the Tso enquiring whether the Tso would be willing to extend the lease of the Lots.

100.  Upon checking, the Tso found out that the 1^st defendant was a private company wholly owned by the 4^th defendant.

101.  On 23 August 2013, a meeting was arranged where the 4^th defendant handed back the Tso documents to the Tso under the witness of both sides’ solicitors. Among the documents returned were the accounting books.

102.  Upon checking, however, it transpired that the 4^th defendant did not return all the documents, including the lease booklets and the Tso minutes for the period between 2006 and 2013.

103.  Furthermore, a number of entries recording the receipt of rentals in the accounting books were amended. For the entries from 2009 to 2013, the part where it was supposed to state the paying party was crossed out and the words “PTU” were substituted. The plaintiff says that it was the 4^th defendant who made the amendments in an attempt to conceal the true identity of the paying party.

Trespass

104.  On the above factual premise, the plaintiff contends that the defendants are liable for trespass. Since 2006, the defendants have exclusively occupied the Lots without the prior consent or approval of the Tso. Such exclusive occupation amounts to trespass.

105.  The 4^th defendant incorporated the 1^st defendant to occupy the Lots and operate a car park there for the purpose of concealing his breach of fiduciary duty to the Tso. The 1^st defendant is the alter ego of the 4^th defendant. In the circumstances, the corporate veil of the 1^st defendant should be lifted. Hence the 4^th defendant should be personally liable for the 1^st defendant’s trespass.

Breach of fiduciary duties by the 4^th defendant

106.  The plaintiff claims against the 4^th defendant for breach of fiduciary duties.

107.  At all times, the 4^th defendant knew that the Lots belonged to the Tso and the Tso had never authorised any of the defendants to use them. Nevertheless, the 4^th defendant allowed the 2^nd defendant, and caused the 1^st defendant, to exclusively occupy and operate the car park business on the Lots for making profit.

108.  By such act, he was in breach of his fiduciary duties owed to the Tso in his capacity of its officer:

(1)  He placed himself in a position of conflict of interest.

(2)  He did not inform or obtain consent from the Tso for such use.

(3)  He acted for his own benefit or for the benefit of the 1^st and 2^nd defendants in a manner not authorised by the Tso.

(4)  He could not have honestly considered the exclusive occupation of the Lots by any of the defendants was for the joint benefit of the Tso and the defendants.

(5)  He attempted to conceal the identity of the paying party in the accounting books by substituting it with the words “PTU”.

(6)  What he did amounts to self-dealing.

Dishonest assistance and/or knowing receipt of the 1^st defendant

109.  The plaintiff claims against the 1^st defendant for dishonest assistance and/or knowing receipt.

110.  The plaintiff says that as the 1^st defendant is the 4^th defendant’s alter ego, the 4^th defendant’s knowledge as stated above should be imputed to the 1^st defendant. Hence, the 1^st defendant knowingly and dishonestly took part in his wrongful acts of breach of fiduciaries duties. It would also be unconscionable for the 1^st defendant to retain the benefit or profit derived from the business.

Dishonest assistance and/or knowing receipt of the 2^nd defendant

111.  The plaintiff also claims against the 2^nd defendant for knowing receipt and/or dishonest assistance.

112.  The 2^nd defendant is a member of the Tso. He purported to pay rental to the 4^th defendant as officer. He purported to sublet the Lots to the 1^st defendant. The 2^nd defendant knew or ought to have known that the Lots belong to the Tso and that the 4^th defendant did not have authority to allow him and the 1^st defendant to exclusively occupy the Lots for operating business for profit. It would therefore be unconscionable for the 2^nd defendant to retain the benefit or profit derived from the business.

Election of remedies

113.  Under the head of trespass, the plaintiff elects to claim damages in the form of mesne profits instead of equitable compensation.

114.  Further, if the plaintiff succeeds in all causes of action, to avoid double recovery, the plaintiff elects for mesne profits under the head of trespass, instead of reliefs arising under the other heads of claims: Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 522F-H.

THE DEFENDANTS’ CASE

115.  The defendants’ case is as follows.

Late 2005 – the Tso granted an oral lease to the 2^nd defendant

116.  As a matter of practice, the manager of the Tso would appoint the officer as an agent to execute leases on its behalf except for leases of ground floor landed properties. The latter leases could only be executed by the manager at a solicitor’s office.

117.  It is the Tso’s practice that no written lease would be required for leasing land to its members. If the lease is by an oral agreement and is about to reach the end of the term, the member is entitled to renew the lease by continuing to pay rent. An example would be the lease of some agricultural land granted to Pang Moon Chi (彭滿池). That is evidenced by the entries made in 2008, 2009 and 2010 in the accounting books.

118.  By an oral agreement between the 2^nd defendant and PKC in late 2005, the Tso agreed to lease the land to the 2^nd defendant:

(1)  The lease would be for one year from 1 January 2006 for an annual rent of $1,000.

(2)  The 2^nd defendant would have an option to renew the lease for one year on the same terms at the end of the lease and any subsequent lease.

119.  The background to this is that the 2^nd defendant had successfully recovered from a Yuen Cheung Hung (袁祥雄) (“Yuen”) the sum of $4,800, being rent arrears for his occupation of the Tso’s land and had succeeded in preventing him from claiming adverse possession of the land. The oral lease was granted as a recognition of the 2^nd defendant’s contribution. Further, the oral lease was of similar terms to the lease to Pang Moon Chi.

120.  The 4^th defendant was present when the oral lease was made.

121.  The oral lease is also supported by the following entry made in 2005 in the accounting books:

“袁祥雄、何景才、彭國权相議，同意由彭國权頂讓，田租每年壹仟元正。”

122.  The above entry was written by Pang Kwok Tai (彭國泰) (“PKT”), who was then the Tso’s officer.

123.  In performance of the oral lease, the 2^nd defendant paid $1,000 in cash to PKT in late 2005. The receipt was recorded in the accounting books as follows:

“21-12-05 彭国权二00六年田租 $1000”

124.  On the annual worship day in early 2006, PKT informed the members about the lease and explained that the 2^nd defendant had succeeded in recovering rent from Yuen.

From 2006 to 2013 – the lease was renewed in subsequent years

125.  In late 2006, the 2^nd defendant exercised the option to renew and paid $1,000 as rent for 2007. The defendants contend that the lease was renewed by the payment of the rent, just like leases granted to other members.

126.  The lease was similarly extended in subsequent years.

127.  From 2006 onwards, the rent was paid to the 4^th defendant in his capacity as the officer of the Tso. The rent was voluntarily increased by the 2^nd defendant to $3,000 commencing from 2008 and $8,000 from 2013.

128.  Corresponding entries were made by the 4^th defendant in the accounting books in subsequent years. For example, the entry for the year 2007 read:

“進彭國權07年全年田租 $1000”

129.  After the dispute arose in 2013, when the 2^nd defendant tried to exercise the option to renew at the end of that year by depositing a cheque of $8,000 to the Tso’s bank account, the Tso refused to accept the payment by returning a cheque for the same sum to the 2^nd defendant’s solicitors in early 2014.

130.  Similarly, at the end of 2014, the 2^nd defendant tried to exercise the option in the same way but the Tso refused to accept payment.

131.  The 2^nd defendant says that the Tso was in breach of the oral lease. He did not accept the breach and has continued to use the Lots as in past years.

2006 to 2008 – the 2^nd defendant carried out site formation works

132.  In reliance on the oral lease, the 2^nd defendant spent a total sum of $702,000 between 2006 to 2008 for site formation of the Lots so that it could operate as a public car park. The contractors who undertook the works included one called Luen Wong Water & Electricity Decoration Engineering Company. In this trial, the 2^nd defendant has produced some typed up records showing the breakdown of the works. However, no invoices or receipts have been produced. In cross-examination, when asked about this, he said that there are indeed receipts for the works but he has not looked for them or disclosed them in this action.

133.  The works included levelling the Lots by land filling, building drainage, preserving rare plants by moving them to other places. They were done in three stages. The first stage was in April 2006 and lasted for three months. The costs were around $250,000. The second stage took place at around April 2007 and lasted for two months. The costs were around $211,000. The third stage took place in around April 2008 and lasted for two months. The costs were around $241,000.

134.  The 2^nd defendant had told PKC about the site formation works in late 2015 before they were commenced.

2008 – the 2^nd defendant sub-leased the Lots to the 1^st defendant

135.  In late 2006, the 2^nd defendant was elected as the village head. As he would not have time to deal with the Lots, he and the 4^th defendant had a discussion in August 2017. The 2^nd defendant would hand over the Lots, on which site formation works had been done, to the 4^th defendant. The latter incorporated the 1^st defendant in August 2017. The 2^nd defendant agreed to sub-lease the whole of the Lots to the 1^st defendant and the latter would also deal with, and collect rentals for, the tenancies of the 3^rd defendant and a descendant of Yuen over the portions of the Lots which they occupy.

136.  In April 2008, the 2^nd defendant orally informed PKC that the Lots would be handed over to the 4^th defendant to handle. PKC agreed. The 4^th defendant was present during that conversation.

137.  The defendants say that at all times the Tso was aware of the lease to the 2^nd defendant. This is because the receipt of the rental for the years from 2006 to 2013 were recorded in the accounting books. Furthermore, each year, on the annual worship day, the accounting books were presented and were open for inspection by members.

2013

138.  Some time in 2013, the 4^th defendant made changes to the entries with regard to the Lots for the years from 2009 to 2013 in the accounting books. In each of those entries, he crossed out the identity of the paying party and wrote down “PTU” next to it. This is because the Lots were adjacent to the PTU headquarters so the identification of “PTU” would make it easy for members to identify the land which was let. He denies that it was an attempt to conceal the true identity of the paying party from the Tso.

139.  The defendants say that in the June 2013 meeting, PKC in fact admitted that he had given consent to lease the Lots to the 2^nd defendant. They rely on the following words of PKC:

“咁而家講4年前呢 嗱 阿佳哩曾經係我面前提過一句 佢話 坤叔 阿權話攞呢幅農地嚟做泊車好唔好呀 我話 好”

140.  As to the plaintiff’s contention that the 4^th defendant had conceded to wrongfully occupying the Lots in the June 2013 meeting, he now explains that prior to the meeting, various members were trying to influence and put pressure on him so as to coerce him into admitting having made a mistake and offering to compensate the Tso. At the meeting itself, he was pressurised and reprimanded by the 20 odd members who were present. The dispute had caused him immense emotional stress. He thought that by making concession, the matter could be settled amicably. That was why he made the offer at the meeting involuntarily. After the meeting, he had to see a psychiatrist for his mental condition and was on psychiatric medication for about six months.

141.  In this action, he has produced a medical certificate by a doctor with a clinic in Tuen Mun. The certificate stated:

“I write to certify that the above named patient is under stress and is suffering from mood disorder, and he is unable to perform his usual duties.

As such it would be appropriate for him to delegate his duties to other people for the time being, until he has recovered from his current mood disorder.”

142.  Lastly, in support of their contention that PKC had in fact granted the oral lease, the defendants refer to a telephone conversation between PKT and PKC which took place in or about November 2013. There, PKT mentioned that PKC had authorised the letting of the Lots to the 2^nd defendant and that was recorded in the accounting books.

143.  Here is an extract of the conversation:

“泰： 更正番先，有兩幅地，嗰個北區醫院幅地，我就唔知喇。但係呢，(基新) 後面幅地呢 [ie the Lots]，嗰時踢數時你都喺度，你話租比國權，寫咗喺簿頭應該，嗰塊田嗰時核數時個個都知。

坤： 租比國權？

泰： 即係 嗰塊 (基新) 後面嗰塊呀！

坤： 係！係！係！

泰： 一定係！

坤： 租比國權？

泰： 係呀！嗰時開會就係寫喺簿頭寫住，核數時嗰時話，嗰塊田都揼，不如租比國權發展咁。寫喺度呀！

坤： 邊個寫喺簿頭？

泰： 嗰時我，嗰時我仲係揸數，我寫。嗰本簿頭，簿頭應該有，你試下睇睇。如果我冇記錯，可能我記錯咗，但係你一定知。核數時，你都有核數嘛，一定寫喺度。”

Summary

144.  On the above facts, the defendants say that the Tso was in breach of the oral lease by refusing to accept payment for the rent for the years 2014 and 2015. The 2^nd defendant seeks a declaration that he is entitled to exercise the option to renew the oral lease and an order for specific performance, or alternatively damages. As an alternative, the 2^nd defendant asks for the sum of $702,000 for the enhanced value of the Lots under restitution.

145.  On the same facts, the defendants say that PKC, as manager of the Tso, induced, encouraged or caused the 2^nd defendant to believe that he was and will be able to continue to use the Lots in the same way as before. In reliance, the 2^nd defendant acted to his detriment by investing in the site formation and other improvement works on the Lots. In the circumstances, the Tso is estopped from denying the 2^nd defendant’s entitlement to renew the lease.

ISSUES IN DISPUTE

146.  The parties have agreed on a list of issues. I would summarise them below.

147.  First, did the oral lease exist?

148.  Second, if yes, was it valid, considering that it was not granted by all the managers of the Tso?

149.  Third, if yes, should the 2^nd defendant be entitled to specific performance of the oral lease or, alternatively, damages?

150.  Fourth, if the answer to the first or second issue is no,

(1)  Are the 1^st and 2^nd defendants liable for trespass?

(2)  If so, is the 1^st defendant the alter ego of the 4^th defendant and should the corporate veil be pierced such that the 4^th defendant should be held liable for trespass too?

(3)  Can the plaintiff claim trespass against the 2^nd and 4^th defendants, who are members of the Tso and co-own the Lots with the other members?

(4)  If yes, if trespass by the defendants is established, what should be the quantum of damages?

151.  Fifth, in any event, should the Tso be estopped from recovering possession of the Lots from the defendants?

152.  Sixth, was the 4^th defendant in breach of his fiduciary duties owed to the Tso as officer?

153.  Seventh, if yes, should the 1^st and 2^nd defendants be liable for dishonest assistance and/or knowing receipt?

154.  Eighth, if the answer to the sixth and/or seventh issues are yes, what is the quantum of damages or equitable compensation?

155.  Notwithstanding that parties had previously agreed on a list of issues, in his opening submissions, Mr Cheung raised a number of new issues. One of them is whether the plaintiff is under the burden to prove ouster vis-à-vis the 2^nd and 4^th defendants. His contention is that these two defendants, being members of the Tso, are beneficial co-owners of the Lots and other co-owners are not allowed to occupy the land to their exclusion. It follows that the cause of action of trespass cannot be maintained against the 2^nd and 4^th defendants unless there is ouster. That means that the plaintiff needs to show that the two of them have occupied the Lots to the exclusion of other members. But the plaintiff has failed to adduce any evidence to that effect.

156.  Mr Ho objects to the issue of ouster being raised.

EVALUATION OF THE EVIDENCE

157.  In evaluating the evidence, contemporaneous documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility. Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events. Regard should be had to the consistency of the witness’ evidence with undisputed or indisputable facts, and its own internal consistency. Care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of his character. Regard should be had to the witnesses’ motives and to the overall probabilities. See Leung Chin Sing, Rabo v Ko Chun Hay, Kelvin [2021] HKCFI 2242 at paras 41 to 43.

158.  In this case, there is no dispute that the defendants have been occupying the Lots and operating a car park there since 2006. The major factual dispute in this action is under what circumstances they have come to do so. The defendants say that it was pursuant to the oral lease granted by PKC acting on behalf of the Tso. The plaintiff says that PKC or the Tso knew nothing of the oral lease and that the defendants have been occupying the Lots without the Tso’s consent or authorisation.

159.  It is for the defendants to make out their factual case of oral lease on the balance of probabilities.

160.  Having reviewed the evidence, I do not consider that they have succeeded in doing so.

The supporting evidence is inadequate

161.  The issue turns on whether the testimony of the 2^nd and 4^th defendants is credible.

162.  However, what is notable in this trial is the defendants’ failure to call PKT to testify. According to their case, it was PKT, the then officer, who wrote the entry recording the oral lease in the accounting books. It was also PKT who reported the oral lease to the members on the annual worship day in 2006. Furthermore, after the dispute emerged, it was also PKT who spoke to PKC in November 2013 about the oral lease. In this trial, the defendants rely on the entry in the accounting books as a key piece of contemporaneous document in support of their case (see para 121 above).

163.  Hence, PKT should be able to confirm the existence of the oral lease, with his personal knowledge of it. Also, he should be able to speak to the circumstances in which his telephone conversation with PKC took place in November 2013.

164.  On the face of it, PKT does not have any personal interest in the oral lease, the Lots or the operation of the car park (save as a member of the Tso). Hence, if the defendants’ case is true, his evidence as an independent witness would be very valuable and would likely go a long way to support the case. However, he was not called. When asked about this, the 2^nd defendant simply said that PKT was of old age and in poor health and he did not want to impose on him to testify. I do not find this explanation convincing. When the 4^th defendant was asked about it, he simply said that there was no reason for not calling PKT.

165.  In any event, in the absence of any corroborating evidence, it is difficult to see how the conversation in November 2013 assists the defendants’ case. Contrary to their submission, PKC did not confirm the existence of the oral lease. It was PKT who initiated the discussion and stated that there had been an oral lease. In the course of the conversation, PKC was apparently only trying to understand correctly what PKT was saying to him. On a plain reading of the transcript, it cannot be said that PKC had confirmed the existence of the oral lease.

The 4^th defendant’s admission in the June 2013 meeting is damaging

166.  In my view, not only have the defendants failed to adduce adequate evidence to show the existence of the oral lease, the evidence before the court goes to contradict their case. In this regard, I refer to what was said in the June 2013 meeting. The contents are plainly damaging, if not fatal, to the defendants’ case.

167.  I have quoted extensively from the transcript in para 93 above. The extracts show the following.

168.  First, before 2013, PKC and PSY knew nothing about the defendants’ use of the Lots and the operation of the car park there.

169.  The defendants now try to rely on what PKC said about a conversation a few years back in which he said yes when the 4^th defendant suggested using the Lots for car parking. See para 139 above. In my view, that statement is taken out of context. In fact, PKC immediately went on to say that that was all he said at that time and he had absolutely no idea what happened afterwards. See the italicised parts in para 93 above.

170.  Second, the 4^th defendant admitted that he and the 2^nd defendant together developed the Lots and operated a car park there, without the authorisation of the Tso. He repeatedly apologised for that in the meeting. He also expressed his willingness to be held responsible for the occupation. And he suggested that he would pay rent in an amount acceptable to the Tso or alternatively he would return the land.

171.  As such, it is plain that the allegation that PKC granted an oral lease to the 2^nd defendant in 2005 is directly contradicted by what was said in the June 2013 meeting. The 4^th defendant made no mention at all of the oral lease. Furthermore, if the oral lease had indeed existed, the 2^nd defendant (and hence the 1^st defendant) would have been entitled to remain on the Lots under its terms by paying the agreed annual rent. However, the 4^th defendant was offering to pay rent acceptable to the Tso or return the land. All these overwhelmingly suggest that the oral lease had never been granted.

172.  The 4^th defendant’s explanation that he was coerced into admitting wrongdoing is inherently implausible and incredible. If what he says is true, he was in effect giving up all the rights of the 2^nd defendant under the oral lease, and hence the rights of the 1^st defendant under the sub-lease, in the June 2013 meeting.

173.  As revealed in the audio recording of the meeting, the 4^th defendant spoke articulately and sounded composed and stable. The medical certificate also does not indicate that he was prescribed any psychiatric medication for his condition. In fact, he confirmed in cross-examination that the doctor he saw was his family doctor.

174.  I reject the 4^th defendant’s explanation as incredible.

There are many inconsistencies within the defendants’ own case

175.  Mr Ho submits that there are many inconsistencies within the defendants’ own case. I share that observation. I highlight some of the material ones below.

176.  It should first be pointed out that quite a number of paragraphs in the 2^nd defendant’s witness statement were simply “copied and pasted”, word for word, from the 4^th defendant’s witness statement. In his own witness statement, the 2^nd defendant kept referring to himself by his full name, rather than “I” or “me”. In para 21, he stated that he attended the June 2013 meeting and was the manager of the Tso. This is clearly wrong. He did not attend the meeting. And he was not the manager. This again was copied from the 4^th defendant’s witness statement.

177.  When this was pointed out to him in cross-examination, he tried to blame his then solicitors for the mistakes.

178.  It is the responsibility of the witness to make sure that his written statement is accurate. In my view, the fact that such basic mistakes have been made in his witness statement appear to suggest that the 2^nd defendant did not pay any care at all to the correctness and accuracy of his statement. This casts a bad light on the reliability of his testimony.

179.  Secondly, the defendants’ case on the terms of the oral lease has been inconsistent in this action.

180.  It is their pleaded case that it was orally agreed that the lease was for one year with a yearly option to renew. However, contrary to that, the 2^nd defendant said in cross-examination that PKC did not expressly mention about the duration of the lease, nor did he explicitly mention about the option to renew. It was only his understanding at the time. The stark contradiction between the pleading and the oral evidence is inexplicable.

181.  It is the defendants’ pleaded case that (1) the oral lease covered the Lots excluding the area occupied by the 3^rd defendant, and (2) there was a direct lease between the Tso and the 3^rd defendant in respect of his portion. However, contrary to that, the 2^nd defendant said in cross-examination that he leased the whole Lots, ie including the 3^rd defendant’s portion, from the Tso and then handed over them to the 1^st and/or 4^th defendants to manage. The 4^th defendant also said in cross-examination that the oral lease covered the whole Lots. Again, there is no explanation for this inconsistency.

182.  It is the defendants’ pleaded case that in 2008, the 2^nd defendant sub-leased the land to the 1^st defendant. However, in cross-examination, the 2^nd defendant said that it was not a sub-lease but he handed over the land to the 1^st defendant for management. Furthermore, he did not receive rental but instead received one-third of the profits made by the 1^st defendant. In cross-examination, he had no explanation for this inconsistency save to say that sometimes he was in a hurry to sign legal documents in this action.

183.  Shortly after the dispute arose in 2013, there was an exchange of solicitors’ letters. The defendants’ stance as recorded in those letters is inconsistent with their present position.

184.  By letter dated 9 July 2013, Messrs Alan Ho & Co wrote to the Tso stating that they acted for the 1^st defendant and that they were instructed that the oral tenancy agreement between the Tso and the 1^st defendant had expired and sought a renewal.

185.  This position is clearly different from the defendants’ pleaded case. When asked about this in cross-examination, the 4^th defendant claimed that the firm in fact represented the 2^nd defendant and he blamed the law firm for mistakenly stating that the 1^st defendant was the client and that the oral tenancy had expired.

186.  Further, by letter dated 12 November 2013, the same firm wrote to the Tso’s then solicitors stating that they acted for the 1^st and 2^nd defendants and that the Tso granted an oral tenancy agreement to the 2^nd defendant “permanently for HK$1,000.00 per annum”.

187.  Again, this position is different from the defendants’ present stance, which is that the lease contained an option to renew annually.

188.  Thirdly, apart from the inconsistencies over the terms of the oral lease, the defendants’ evidence on who paid for the site formation works is also inconsistent and thus unclear.

189.  It is their pleaded case that the 2^nd defendant carried out such works and he paid for them. It is in fact he alone who makes the counterclaim against the plaintiff seeking the return of the sum of $702,000.

190.  However, the financial records of the 1^st defendant entitled “Profits Tax Computation” for the years 2007/2008 and 2008/2009 reveal that it paid a sum of about $161,850 for levelling and other works at the car park during the years of assessment. The relevant entry read:

“Additions to Fixed Assets – Decoration
Description	HK$
停車場地 – 土地平可整	125,000
Steel work and lightening	36,850   _______________
(Y/A 2008/09)	161,850”
	=============

191.  On its face, this goes to contradict the 2^nd defendants’ evidence that after he completed the site formation works, he handed over the Lots to the 1^st defendant. The 4^th defendant was cross-examined on this. He gave a number of answers. First, he said that the 1^st defendant made the payments for the third stage of the works in 2008. When asked whether the payments were made by the 1^st or 2^nd defendant, he then said that the payments were made by the 1^st defendant but subsequently repaid by the 2^nd defendant. However, he was unable to say when the repayment took place or whether the repayment was recorded in the 1^st defendant’s financial statements.

192.  I also note here that according to the same document, the 1^st defendant commenced operation from 1 October 2007, not from 2008 as alleged by the defendants.

193.  In my view, the defendants’ evidence on who paid for the site formation works is inconsistent and incoherent.

194.  In addition, while the 2^nd defendant confirmed in cross-examination that he in fact has receipts for the works, he has not tried to locate them for the purpose of this trial. What he has disclosed is merely a breakdown of the works, but not invoices or receipts issued by the contractors. In this regard, I find that he has failed to adduce sufficient evidence to substantiate the amount which he now says he has spent.

The plaintiff’s evidence is on the whole coherent and consistent

195.  By contrast, the plaintiff’s case is on the whole coherent and consistent. PSY’s allegation that before 2013, he knew nothing about the defendants’ occupation of the Lots and the operation of the car park there is entirely consistent with what was said in the June 2013 meeting.

196.  The cross-examination of PWM and PWK was brief. They were not subject to much challenge. There is no reason to doubt what they described to be the general custom of the Tso, including the ceremony on annual worship days.

FACTUAL FINDINGS

197.  For the reasons stated above, I am unable to find the evidence of the 2^nd and 4^th defendants to be reliable or credible. I decline to find as facts their factual case. On the other hand, I consider that the plaintiff’s evidence is credible and I accept it as true.

198.  More specifically, first, I find that the oral lease alleged by the defendants did not exist. The alleged conversations with PKC in late 2005 (concerning the oral lease and the site formation works) and 2008 (concerning the sub-lease) did not take place.

199.  Secondly, I find that the 2^nd defendant has since January 2006, and he together with the 1^st defendant have since October 2007, been in exclusive possession of the Lots and have been operating a car park there for profit and that neither PKC nor PSY had any knowledge about it before the annual worship day in 2013. As such, such exclusive possession of the Lots is without the consent or authorisation of the Tso.

200.  In his cross-examination, the 4^th defendant made a point in mentioning that he allowed other members of the Tso to park their cars on the Lots. This allegation was never made previously in this action. It seems to me to be a last-minute attempt to suggest that the defendants have not been in exclusive possession of the Lots. This relates to the issue of ouster emphasised by Mr Cheung at the trial. I shall come back to it shortly below. On the facts, however, I refuse to find what the 4^th defendant said here as true as the general credibility of his testimony is in doubt.

201.  Thirdly, I find that at any annual worship day ceremony, members of the Tso would not be in a position to find out that the Lots had been leased to the 2^nd defendant. This is because in general the lot numbers of the land leased out or its location would not be recorded in the accounting books and would not be read out on the day.

202.  Fourthly, I find that site formation works had been carried out at the Lots. However, I am unable to find who had paid for such works. Because of the lack of documentary evidence (eg invoices etc), I am also unable to find how much had in fact been paid for the works.

203.  Fifthly, I find that the 4^th defendant knew that (1) at all times the 1^st and 2^nd defendants’ use of the Lots for profit was without the consent or authorisation of the Tso, and (2) as officer of the Tso, he was in a position of conflict when he allowed them to do so.

204.  Sixthly, I find that some time in 2013, the 4^th defendant crossed out the identity of the paying party in the entries for 2009 to 2013 in the accounting books by substituting it in each entry with the words “PTU” and he did so to conceal the true identity of the paying party, cover up the 1^st and 2^nd defendants’ use of the Lots from members of the Tso, and to conceal his own involvement in it.

205.  Seventhly, I find that the 4^th defendant specifically incorporated the 1^st defendant in August 2007 to operate the car park on the Lots. He did so with a view to concealing the defendants’ use of the Lots from the Tso. The 1^st defendant is the alter ego of the 4^th defendant.

206.  Eighthly, I find that the 2^nd defendant knew that the 4^th defendant did not have the authority to allow him and the 1^st defendant to use the Lots for profit. However, the 4^th defendant did so. The 2^nd defendant would receive one-third of the profits generated from the car park business.

RULINGS

207.  Based on the above factual findings, I proceed to deal with the causes of action raised by the plaintiff.

Trespass

208.  Based on the facts as found in para 199 above, the 2^nd defendant has since January 2006, and he together with the 1^st defendant have since October 2007, been trespassing the Lots.

209.  As regards the 4^th defendant, the 1^st defendant is his alter ego. The corporate veil should be lifted in this case as the 1^st defendant has been incorporated and used by him to evade his legal obligations as officer of the Tso: Winland Enterprises Group Inc v Wex Pharmaceuticals Inc [2012] 2 HKLRD 757 at para 54. Hence, the 4^th defendant should also be liable for trespass as from October 2007.

The issue of ouster

210.  The 2^nd and 4^th defendants are members of the Tso. Mr Ho accepts that as such they are the beneficial co-owners of the Lots and no action of trespass can be maintained against them unless there is ouster – that is unless the 2^nd and 4^th defendants have occupied the Lots to the exclusion of the other members of the Tso: see, eg, Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52 at para 212.

211.  According to their pleaded case, the defendants say that they have been occupying the Lots pursuant to the oral lease and the sub-lease. Mr Ho submits that this is in effect their admission that they have been exclusively occupying the Lots to the exclusion of others since by its nature, a lease confers exclusive possession on the lessee: Street v Mountford [1985] 1 AC 809 at 818E-F. Hence, ouster is admitted on the defendants’ own pleadings.

212.  At the beginning of the trial, Mr Cheung took the point for the first time in this action that the burden is on the plaintiff to prove ouster. He submitted that the plaintiff had failed to adduce evidence to show that the 2^nd and 4^th defendants have been excluding other members of the Tso from the Lots. He says that there is no evidence that any member of the Tso has been denied entry to the Lots or has been demanded to pay a fee to park vehicles there. Hence, its claim for trespass must fail as regards the 2^nd and 4^th defendant.

213.  I accept Mr Ho’s submissions and reject Mr Cheung’s.

214.  It is plain from a reading of the defendants’ pleadings that they are asserting their right to occupy the Lots pursuant to the oral lease and the sub-lease. By making that assertion, they must be taken to mean that they have been occupying the Lots on an exclusive basis because that is what a lessee is granted under a lease. On this point, Mr Cheung argues that as a matter of law, the Tso cannot grant a lease to a member because co-owners of land cannot confer exclusive possession on one of the co-owners because of unity of possession. However, he has not cited any authority in support of that proposition. I do not accept that proposition.

215.  The battle lines between the parties have been clearly drawn upon the close of pleadings. The issue is whether the defendants’ exclusive possession is pursuant to the oral lease or is without the authorisation of the Tso. Ouster is not an issue disclosed by the pleadings. Hence, I reject the defendants’ submission that the burden is on the plaintiff to prove ouster in this action.

Estoppel

216.  Lastly, as regards the defendants’ contention that the Tso should be estopped from denying the 2^nd defendant’s right to renew the oral lease, as I have found that no oral lease existed in the first place and the alleged conversations with PKC did not take place, there is simply no room for any estoppel to arise.

Quantum for trespass

217.  Under the claim for trespass, the plaintiff asks for mesne profits. Mr Ho submits that as a matter of general principle, it should be calculated based on the market rent for the land regardless of whether the plaintiff would use the land or the defendants had in fact so used the land. The plaintiff is entitled to recover a reasonable rent for the wrongful use of his property by the trespasser: Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 at 718A-C. Further, Mr Ho submits that under the block crown lease, the Lots are not subject to any land use so long as no structure is erected on them: Attorney-General v Melhado Investment Ltd [1983] HKLR 327. On this basis, the plaintiff is entitled to claim mesne profits based on car park use. Mr Cheung does not dispute the application of the principle set out in Inverugie Investments but submits that the mesne profits should be assessed by reference to agricultural use.

218.  It is the plaintiff’s own case that it has always treated the Lots to be agricultural lands. In the June 2013 meeting, members of the Tso expressed grave concern over the fact that the defendants had been operating a car park there. In the circumstances, in assessing the mesne profits, I consider that the reasonable rent should be assessed based on agricultural use.

219.  According to the valuation of the plaintiff’s expert, the market rental for the Lots (excluding the area occupied by the 3^rd defendant) from 1 January 2006 to 31 December 2022 would amount to $8,404,200 in total and the market rental from 1 January 2023 would be at a monthly rate of $66,120. On the other hand, the defendants’ expert has come to a much lower valuation. The two corresponding figures are $2,323,108 and $17,400.

220.  The parties elected not to call upon the experts to give oral testimony. Their evidence was therefore not subject to any cross-examination. Counsel have not made detailed submissions justifying why their respective experts’ figures should be preferred.

221.  Having reviewed the expert reports, I would prefer the defendants’ valuation to the plaintiff’s. In his valuation, the plaintiff’s expert has relied on asking rents for agricultural land as there are only a few short term tenancy transactions available in the relevant period. On the other hand, the defendants’ expert opines that using the asking prices for comparison is not suitable, primarily because they are not agreed rents. Hence, the defendants’ expert has made use of the short term tenancy transactions and other agreed tenancy agreements for agricultural land in Fanling as comparables.

222.  I share the defendants’ expert’s reservation about the use of asking rents as comparables. I prefer his approach to that of the plaintiff’s expert.

223.  Accordingly, the mesne profits would be assessed at (1) the total sum of $2,323,108 for the period from 1 January 2006 to 31 December 2022, and (2) at a monthly rate of $17,400 from 1 January 2023 onwards until vacant possession is delivered.

224.  As the 1^st and 4^th defendants are only liable for trespass from October 2007 onwards, they would only be liable to pay mesne profits accruing from that date. According to my calculation, the mesne profits for the period from 1 January 2006 to 30 September 2007 would amount to $112,961 (ie [$6,200 x 12 months + $6,160 x 9 months] x 87%)[1]. The 1^st and 4^th defendants would not be liable for this sum.

225.  In his closing submissions, Mr Ho has not asked for interest as part of the reliefs sought. Accordingly, I make no order on interest.

226.  The first, fourth and fifth issues in dispute are all answered in the plaintiff’s favour. That would be sufficient to dispose of the plaintiff’s claim.

Other causes of action

227.  Given that the plaintiff has succeeded in establishing trespass against all the three defendants and it has elected to claim mesne profits as its remedy, it is unnecessary to deal with the other causes of action. I would simply state my rulings on them.

228.  The 4^th defendant owes the fiduciary duties as set out in para 77 above to the Tso. Based on the facts as found in paras 203 to 205 above, he is in breach of his fiduciary duties owed to the Tso.

229.  Based on the facts as found in paras 205 to 206 above and the plaintiff’s submissions as set out in paras 110 and 112 above which I accept, the 1^st and 2^nd defendants are liable for dishonest assistance by inducing or assisting in the 4^th defendant’s breach of fiduciary duties.

230.  On the same basis, the 1^st and 2^nd defendants are also liable for knowing receipt in respect of the profits which they have received from the operation of the car park.

The counterclaim

231.  As the oral lease did not exist, the 2^nd defendant’s counterclaim based on the lease must fail. Furthermore, I repeat what I say in para 202 above. Accordingly, I also reject his counterclaim for the sum of $702,000.

ORDERS

232.  In addition to the orders which I make in paras 65 to 67 above, I further make the following orders.

(1)  The 1^st, 2^nd and 4^th defendants do forthwith cease trespassing the Lots.

(2)  The 1^st, 2^nd and 4^th defendants do deliver up vacant possession of the Lots to the plaintiff.

(3)  The 1^st, 2^nd and 4^th defendants whether by themselves or their servants or agents or otherwise be restrained from being in exclusive possession of the Lots.

(4)  As against the 2^nd defendant, judgment be entered in the sum of $112,961.

(5)  As against the 1^st, 2^nd and 4^th defendants, judgment be entered in the sum of (a) $2,210,147 and (b) $17,400 per month from 1 January 2023 until vacant possession of the Lots is delivered.

(6)  The counterclaim of the 1^st, 2^nd and 4^th defendants be dismissed.

233.  I make an order nisi that the plaintiff do have costs of the action and the 1^st, 2^nd and 4^th defendants’ counterclaim, including all reserved costs, to be taxed on a party-to-party basis if not agreed, with certificate for two counsel.