TANG SIU FOR v. TAO CHI SHING AND OTHERS

HCA 2336/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2336 OF 2004

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D E C I S I O N

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1.  This is an application by Mr To Kin Man, a member of a religious tong called Fuk Tak Kung or To Fuk Tak Kung (hereinafter called “the Tong”), for extension of time to vary a costs order nisi made by me in a judgment handed down on 29 January 2007.

Background

2.  The members of the Tong are the villagers of Nai Wai Village in Tuen Mun and the managers are the defendants in this action.  The plaintiff sued the defendants because they refused to acknowledge his Tong membership and withheld from him the Tong’s benefits.  The defendants are not the only ones who held this view.  They have the support of the majority of members who are all surnamed To. 

3.  The real dispute is whether four persons surnamed Tang and Yuen (including the plaintiff), who are also indigenous villagers of Nai Wai, are also members of the Tong.  The majority says that only indigenous villagers of Nai Wai of the surname To are members of the Tong.  If the four persons surnamed Tang and Yuen are included, the total number of members would be at 130 members.

4.  There is however a significant minority of the Tos who is on the side of the plaintiff.  Mr To Kin Man is one of them.  In fact the 1^st and 3rd defendants also appear to be sympathetic with the plaintiff’s cause.

Costs order nisi

5.  After the trial, I gave judgment in favour of the plaintiff.  I also made a costs order nisi.  I ordered the defendants to pay the plaintiff his costs of the action.  I also ordered that the defendants could recover their costs from the Tong.  I did so without hearing from the members of the Tong, in particular those who were in the minority.  I said:

“	165.	When the Defendants manage the affairs and properties of the Tong, their position is akin to that of trustees.  I therefore consider their position under O. 62 r. 6(2).  They have not applied for any Beddoe Order before embarking on the defence of this action.  Now that they have lost the action, they would not be allowed to charge the Tong for the costs unless there are very exceptional circumstances.
	166.	If I should conclude that had they applied to me, I would have made a Beddoe Order allowing them to defend the action with costs to come out of the Tong, then I can allow them to charge the Tong for these costs now.  (See In re Beddoe [1893] 1 Ch. 547 at 558 and 562 and Ip Cheung Kwok v Ip Siu Bun, CACV 79 of 1988 at p.6 to p.9.)
	167.	I think there are special circumstances in this case.  This dispute has been in existence since about 1993.  It has a very unsettling effect on the relationship of the Nai Wai villagers.  After the payment of $15,000 to each household in June 2003, this dispute had developed to a scale that cried out for resolution.  The majority of the Tos were against any further payment to the Tangs and Yuens.  The managers could not have ignored their sentiment and the pressure therefrom.  They were placed in an unenviable position.  Regardless of their own thinking, it would have been very difficult for them to continue to pay the Tangs and Yuens.  I note from the letters written by the 1st Defendant to his fellow Tos that the 1st and 3rd Defendants were in fact in favour of paying them, but the reality prevented them from doing so.  At least for the 1st and 3rd Defendants, the decision not to pay was not a voluntary one.  However, there was also a significant majority of the Tos who thought that the Tangs and Yuens are members of the Tong and should be paid.  The best way out was for the matter to be adjudicated in this court.
	168.	I am of the view that if the Defendants should have, before embarking on the defence of this action, applied to me for a Beddoe Order, I would have granted it and allowed them to have costs from the Tong to fund their defence.  The judicial resolution of this dispute will benefit the whole village.  I therefore allow the Defendants to recover the costs from the Tong.”

Warning at the pre-trial review

6.  When I made the order nisi, I forgot that I had, at the first Pre-Trial Review on 22 September 2006, already warned the Defendants through counsel that if they should fail in their defence, I might make an order restraining them from obtaining reimbursement of costs from the Tong.  The reason being that the Tong properties belonged to all members, not just those who were against the plaintiff.  I gave the warning then as I was aware that even the members surnamed To had split into two camps and were at loggerheads.  It appeared to me that it might not be fair to require those who were sympathetic to the plaintiff to subsidise the costs of the defence in case the plaintiff should succeed.  My clerk clarified this warning to the parties in a letter dated 29 September 2006, because the parties understood it in different ways.

7.  Despite this warning, no application was made by the Defendants for a Beddoe Order.  If an application were made at that time, I would have canvassed the views of the members surnamed To in particular those who were in the minority. 

8.  There was also no application by those who were against the plaintiff to be joined as additional defendants.  In fact, all those who were on the defendants’ side could have applied to join as additional defendants.  They could counterclaim a declaration that the plaintiff and those surnamed Tang and Yuen were not members of the Tong.  Those on the plaintiff’s side could have applied to join as defendants to the counterclaim to resist the majority.  But nothing was done by anyone.

The applicant’s arguments

9.  At the hearing of this application, no less than 10 persons had appeared in this court to support the cause of Mr To.  Mr To’s points are simple and straightforward.  He and those on his side had always taken the same stance as the plaintiff.  They also opposed to the use of the Tong’s funds to defend this action from the start, as they had interests in the Tong’s assets.  The minority has now been proved right.  There is no reason to require them to share the burden of the costs for resisting a cause they believed in.  Those who were in favour of defending the action could always share this burden by providing financial support to the defendants.

10.  Furthermore, each of the four households surnamed Tang and Yuen was usually paid just $3,000 a year.  However, he learnt that the costs for defending the action were at $1.3 million even before the plaintiff’s taxed costs were included.  The defendants’ own costs were enough to pay the four households surnamed Tang and Yuen for a century.  The minority including the Tangs and Yuens should not be asked to subsidize such expensive litigation to fight against those who had been accepted as members for decades.  The majority should not be allowed or encouraged to embark upon such venture with the assets of the minority.  He was also against the making of a Beddoe Order in this action.

The arguments of the 2nd defendant

11.  The 2^nd defendant To Shui Tai has made an affirmation to oppose this application.  He said the defendants were working for the Tong.  They were sued because they were the managers.  They had the support of the majority of members the number of which ranged between 79 to 89 at different times.  The decision not to pay the Tong’s benefit to the plaintiff was authorised by the majority.  They obtained no personal benefit in so doing.  Furthermore, the decision given by the court benefited the Tong as a whole.  It also resolved a long-standing dispute.

Discussion and analysis

12.  When I made the order nisi, I treated this action as a friendly match instituted to resolve a legal issue between friendly parties.  In retrospect, I think that was not the correct view.  In a friendly match where the parties are on good terms and the matter does not involve serious factual dispute, there may be more justification in not requiring the loser to bear the costs of the successful party.  In many cases, the parties would consent to no order of costs being made.  In this action, the parties were at loggerheads right from the start.  They were belligerent towards each other.  They fought on all possible issues.  The defence went to the extent of pleading that the Tong was an ancestral worshipping tong of theirs.  That meant taking the Taoist god of Toe Tei Kung as their ancestor.  This action was also not to fight against an outsider for the benefit of the Tong. 

13.  Even though the majority of the members did not regard the plaintiff as a member, they could not stop the managers from distributing the Tong’s benefit to him.  This dispute on membership had been there since 1993, but the managers had continued to distribute the Tong’s benefits to the Tangs and Yuens.  They did not feel prohibited from so doing by the will of the majority until 2003.  It stopped in the middle of that year because there was a large sum of compensation for land resumption available for distribution and the amount to be distributed to each member was about $30,000. 

14.  Those who did not regard the plaintiff as a member could always have sued the plaintiff for a declaration to that effect.  They could join the managers as nominal defendants so that the managers would be bound by the declaration, if granted.  If they did not take such course, the managers did not have to listen to them regardless of whether they constituted the majority.

15.  The managers are trustees of the Tong.  If they have doubts on the criteria of membership of the Tong, they should seek independent legal advice.  It is not a matter that could be decided by the majority.  The membership involved property rights and the majority cannot confiscate such rights of any member by excluding him from membership.  If the majority should have taken an incorrect view and the managers just followed it, then the managers must bear the consequence. 

16.  Furthermore, the fact that the managers in following the majority did not obtain any person benefit is neither here nor there.  Their action affected the rights of the plaintiff.  Their argument that the resolution of this action settled a long-standing dispute of the Tong and benefited the Tong as a whole is also not enough to justify the use of the assets of the minority to subsidize their costs.  This action was also not instituted by their initiative.  They were only being sued after they had acted wrongfully.

17.  Furthermore, the Tong was not set up by the agreement of the members like a limited company.  Membership of the Tong is acquired by birth, not by subscribing to any memorandum or articles of association.  The defendants were not obliged to and should not have followed the majority will.  They did so at their own peril. 

18.  When I gave the warning at the Pre-Trial Review, the defendants could have chosen not to defend the action.  Alternatively, they could have invited those who were in favour of defending the action to join as co-defendants.  They could also have taken the course I indicated in paragraph 8 above by including all members either as plaintiffs or defendants.  But nothing was done.

19.  Looking at the matter with retrospect, if I should have canvassed the views of the minority, I would not have made the order nisi in its present form because I would not have thought that a Beddoe Order was justified.  Even though the defendants had just followed the majority will and derived no personal benefit, they still have to bear the consequence of their actions.  They could have chosen not to abide by the majority will.  They could have continued to distribute the Tong’s benefit to the plaintiff as they did before.

Decision

20.  I therefore allow Mr To’s application to extend the time for his application to vary the costs order nisi.  I also accede to his application for variation.  I make a new order that the 2^nd defendant do pay the plaintiff’s costs of this action.  I leave the three defendants to bear their own costs in defending the action.  However, I do order them not to seek or receive directly or indirectly any payment or subsidy from the Tong to indemnify their legal costs.  The payment or subsidy as prohibited includes money or money’s worth.  The indemnity as prohibited extends to the whole or part of their own legal costs including the costs of this application.  In the case of the 2nd defendant, the indemnity as prohibited also extends to the whole or part of the plaintiff’s taxed costs that he has to bear.

Case of the 1st and 2nd defendants

21.  I excuse the 1^st defendant from the liability to pay the plaintiff’s costs because he has tried to save the plaintiff’s cause.  He was a most reluctant defendant.  He at one time also indicated in writing that he did not want to take part in this application.  The defendants’ representation included him only at the very late stage.  He was more like a nominal defendant.  He had done nothing to resist the plaintiff’s case.  I said in para. 119 of my judgment:

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119.

…  He is in fact a reluctant witness for the defence.  He does not like this dispute and litigation.  He loves peace and harmony in Nai Wai.  He is a good man.  He is ready to offer his interest in the Tong to the Tangs and Yuens to settle the dispute.  However, his goodwill cannot settle the dispute.  He has written a number of passionate letters to his fellow managers and fellow members of the Tos trying to pacify the dispute, but to no avail.”

He should have chosen not to defend this action.  That was his only failure.  If he should have made that choice, he would not have to share the defendants’ own costs for the defence.  The 3rd defendant is more or less in the same position.  He has not said even a word in this action.  His stance can be gleaned from the letter written by the 1st defendant, which I have quoted in my judgment.

22.  If the 2nd defendant should consider that the 1st and 3rd defendants should also be made liable to share the plaintiff’s taxed costs, he can apply to vary this part of the order within the next 14 days.

23.  The defence was really fought by the defence witnesses excluding the 1^st defendant.  DW3 Mr To Koon Nam and the 2^nd defendant were particularly strenuous in fighting this battle.  Whether the defence witnesses and those members in the majority will come forward to share the burden of the defendants’ own costs and the 2^nd defendant’s liability to pay the plaintiff’s taxed costs is a matter for them.  My order prohibiting the seeking or receipt of payment or subsidy does not extend to payment or subsidy from other members of the Tong.

Costs of this application

24.  I now deal with the costs of this application.  The plaintiff has adopted a neutral stance.  Mr To Kin Man has succeeded.  Looking at the matter in the round, I would make no order as to costs.