MAN KWOK TONG v. MAN HING HUNG AND ANOTHER

[English Translation - 英譯本]
DCCJ 2564/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2564 OF 2008

____________

Judgment

1.  This case concerns Man On Tsai Tso (“the Tso”) of Yuen Long, New Territories.  Members of the Tso claim that two of their members who successively took up the post of Duty Manager (值理) of the Tso, i.e. the 1^st Defendant, Man Hing Hung (“Hing Hung”), and the 2^nd Defendant, Man Kam Fai (“Kam Fai”), have breached traditional customs and practices by failing to account for the income and expenditure relating to the letting of the Tso’s land, to distribute ding (丁) money and to produce the relevant records and documents.  Hence they started this action.

2.  This action was originally brought by Man Ying Lam (“Ying Lam”) on behalf of himself and all members of the Tso (excluding Hing Hung and Kam Fai), but with the court’s approval he was substituted by Man Kwok Tong (“Kwok Tong”) last November.  Kwok Tong is Ying Lam’s son.

3.  Since Hing Hung failed to comply with the unless order made by the Court earlier, judgment was entered against him on 20 February of last year and the relief sought was granted accordingly.  As a result this trial commenced in relation to the Tso’s claim against Kam Fai alone.

Background

4.  The Tso has a history of over 100 years and comprises three fongs (房), which are “Man Ying Lam fong”, “Man Ching To fong” and “Man Chiu Pui fong”.  In 2000, the total number of its members was about 100.  Ying Lam and Kwok Tong naturally belong to “Man Ying Lam fong” while Hing Hung and Kam Fai are from “Man Ching To fong”.

5.  The Tso owns two plots of land.  In 1958, the Tso became the owner of one of the plots situated in Lot No. 2938 in DD No. 102.  The other plot is situated in Lot No. 764 in DD No. 99, its owner being “Man Shui Tong Wui” with the Tso owning a 0.5/48 share.  Members of the three fongs of the Tso are entitled to a share of the rental income obtained from the letting of the two lots.

6.  Since 1958, the Manager of the Tso has been Man Kwok Wai (“Kwok Wai”).  In accordance with the traditional customs of the Tso, the above rental income, together with the relevant rent books, general accounts books and bank passbooks (“the relevant records and documents”) have all along been handled and kept by the member appointed as Duty Manager.  In the week after the Chung Yeung Festival each year, the Duty Manager would give an income and expenditure account and distribute ding money to members of the Tso.

7.  The following are the members who were appointed as Duty Manager in the past few years:

8.  In 2005, Kam Fai became Duty Manager again and handled matters relating to the above rental income and the relevant records and documents.  Such records and documents are presently still in the hands of “Man Ching To fong”.

9.  The above background is not in dispute.  It actually covers the facts that have been admitted by the parties under Order 23A Rule 11 of the Rules of the District Court.

The Claim

10.  According to the Statement of Claim, the claim against Hing

Hung and Kam Fai is that they have received the rental income from the above lots on trust and they should use and distribute it in accordance with the above custom and practice. However, in 2004, when Hing Hung served as Duty Manager, he failed to comply with the custom and make any distribution. In 2005, he also breached the custom of members of different fongs serving as Duty Managers on a rotation basis from year to year and arranged by himself for Kam Fai, who belongs to the same fong, to be his successor and passed the relevant records and documents to his possession. Similarly Kam Fai did not make any distribution in that year. Since then, despite repeated requests from members of the Tso, Kam Fai has still refused to produce these documents and account.

11.  The relief sought by the claim in the present action is that Hing Hung and Kam Fai shall account to members of the Tso for the accounts relating to the rental income from the above lots and pay up the amount they each owe members of the Tso after inspection of accounts.  As noted above, the court already made an order in February last year granting the relief sought against Hing Hung.  In addition, members of the Tso also demand that Kam Fai provide to them all the relevant records and documents in his power or possession.

12.  The issues in dispute in this action centre around the following:

(1) the Plaintiff’s locus standi;

(2) the Duty Manager system;

(3) the income and expenditure accounts;

(4) the relevant records and documents.

The Plaintiff's locus standi

13.  Kam Fai argued that the Plaintiff was not the Manager of the Tso and challenged Ying Lam (previously) and Kwok Tong’s capacity in instituting the present action.

14.  There is no dispute that Ying Lam and Kwok Tong are both members of the Tso.  They successively commenced these proceedings on behalf of themselves and all members of the Tso (excluding Hing Hung and Kam Fai).  Mr Tsui for Kwok Tong submitted that these proceedings were representative proceedings.  Under Order 15 Rule 12(1) of the Rules of the District Court, where numerous persons have the same interest in any proceedings, the proceedings may be begun, and, unless the court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them.  According to Rule 12(3), a judgment or order given shall be binding on all the persons represented.

15.  Paragraph 15/12/7 of the Hong Kong Civil Procedure 2010 (Vol. 1) sets out that a person or persons who begin these proceedings do not require leave by the court before the action is begun, nor is the consent of those represented necessary in choosing him or them as the representative(s).  It is, however, an essential condition that the persons who are to be represented and the person or persons representing them should have the same interest (see the explanation given in 15/12/1 and 15/12/2).  As a matter of fact, Kwok Tong was approved by the court to substitute Ying Lam as the Plaintiff to represent the other members of the Tso.

16.  I did raise the point as to whether the Manager of the Tso should be added as a party if the claim involved a trust.  Mr Tsui cited Lee Shui Foo & Ors v Li Chun Fung HCA 1030/2006 (24 February 2009) where the defendant was once the manager of the tso but was later replaced by the second and the third plaintiffs upon their appointment.  That appointment, however, was not duly registered.  The defendant was the registered owner of a certain parcel of land but the second and the third plaintiffs claimed that the beneficial ownership actually vested with the tso and therefore sought a relevant declaration by the court.  Another member who was appointed as a manager at the same time as the defendant was also added as a plaintiff, i.e. the first plaintiff.

17.  In Lee Shui Foo, the defendant also argued that the appointment of the second and the third plaintiffs had not been registered and hence they were not entitled to sue in the capacity as managers.  The court, however, rejected this argument and pointed out that the two plaintiffs sued in their capacity as the members of the tso for those declaratory relief based on the tso’s beneficial ownership in the lots.  Mr Tsui submitted that this served to support the entitlement of Kwok Tong, who is a member of the Tso in this action, to seek an order from the court in relation to the rental income from the lots belonging to the Tso and other matters.

18.  Mr Tsui had a point in his submissions, but what cannot be overlooked are two features of the Lee Shui Foo case.  First, the two plaintiffs at the same time also sued in their capacity as prospective managers for the declaration that they were entitled to apply to the Secretary for the Home Affairs for the cancellation of the appointment of the defendant as a manager of the tso and for registration of themselves as the new managers.  Second, the other person who was appointed as a co-manager with the defendant did in fact join as the first plaintiff.

19.  In Leung Kuen Fai v Tang Kwong Yu (or U) T’ong or Tang Kwong Yu Tso [2002]2 HKLRD, the plaintiff sought a declaration that he had acquired title to the land belonging to the tso by adverse possession.  The tso became the defendant in that case.  In considering whether the tso had lost its right to claim for possession of the tso land against a trespasser by reason of adverse possession and the Limitation Ordinance, the court held that any existing member of the tso could be entitled to commence an action for possession of the tso land against a trespasser.  It was only that in usual circumstances, the managers would have taken action and the members do not need to initiate such action.  However, if for any reason the managers failed to take action, any member of the tso was entitled to commence an action against a trespasser for possession of the tso land in which he also had an interest.  The court made it clear that such an action was for the benefit of all members of the tso and it was not the case that members must sue through the manager of the tso.  However, the managers as trustees would have to be joined as parties to the action (see paragraphs 720F – 721B; 723E – 724J).

20.  The above principles are related to Order 15 Rule 14 of the Rules of the District Court which allows trustees to bring proceedings without joining any of the persons having a beneficial interest in the trust.  Paragraph 15/14/4 of the Hong Kong Civil Procedure 2010 (Vol. 1) sets out that only if the beneficiaries have requested their trustees to sue and the trustees have refused to do so may the beneficiaries sue in their own name.  However, if the beneficiaries have sufficient possession that enables them to maintain an action, e.g. in trespass where the legal title held by the trustee is not involved, they are able to sue on their own.  But the trustees must be added as additional defendants.

21.  The claim in this action is based on the custom in which the Duty Manager shall be directly responsible to members of the Tso rather than the Manager.  As set out in the Statement of Claim, the Duty Manager is comparable to a trustee who handles such matters for members of the Tso.  The claim against Hing Hung and Kam Fai, therefore, is effectively a claim by beneficiaries under a trust against the trustees and does not seem to involve the legal title which is held by the Manager.  As a result, it is not the case that members of the Tso must bring the claim on this action through the Manager.

22.  The evidence illustrates that the Manager of the Tso, Kwok Wai, not only had knowledge about these proceedings but also took the same stance as the other members.  In fact throughout Kwok Wai was a witness for the Plaintiff.  He explained in court that no immediate legal action had been taken because of the Tso’s financial problem.  Later, after this action had begun, Kwok Wai, in his capacity as the Manager, did convene a meeting of all members of the Tso by way of a notice on 21 September 2008.  He also signed to confirm the said notice which was attached with a report detailing the history of the matter and the proceedings.  Although he did not attend the meeting himself, as the Manager he did take a very clear stance on this action.

23.  Having considered all the above factors, I do not think the fact that Kwok Tong, as a member of the Tso, sues on behalf of himself and other members who have the same interests, in the absence of the Manager being a party, brings about incompleteness in the right of action, nor will it cause the judgment and orders given in this action to have no binding force.

The Duty Manager system

24.  According to Kwok Tong, the traditional custom of each of the three fongs taking yearly turns to send a representative to be the Duty Manager has been in place continuously for over 45 years.  The appointment of the intending Duty Manager would then have to be confirmed at a members’ general meeting.  However, such appointment would generally be confirmed unless the member concerned had any unfavourable qualities such as a criminal record.  Kwok Tong further explained that this tradition was not a written one and in view of Hing Hung and Kam Fai’s open challenge to it, members of the Tso eventually had a formal discussion about this system at the general meeting held in 2008.

25.  The minutes of meeting dated 5 October 2008 recorded that the members unanimously passed the resolution that the post of Duty Manager should be filled by descendants of each fong by yearly rotation.  No private handover would be allowed and the date and location of the handing over of accounts would have to be made public.  In others words, members of the Tso formally confirmed this tradition.  At the same time they also discussed and resolved on other relevant arrangements.

26.  Kam Fai contended that there was no written rule which stipulated that the post of Duty Manager was to be assumed by representatives of the three fongs by rotation.  As noted above, that is not in dispute.  Kam Fai, however, went on to say that there was absolutely no such traditional custom of each fong taking yearly turns to send a representative.  He claimed that any member, irrespective of the fong to which he belonged, could just approach the outgoing Duty Manager and inform the latter of his intention if he was interested in the post.

27.  I shall assume that a member of whichever fong who wishes to become a Duty Manager may theoretically be able to do so as long as his appointment is agreed upon by all members of the Tso.  Nevertheless, if what Kam Fai claimed is true, then as far as the post of Duty Manager is concerned, there will not even be the need to have yearly terms or yearly change of personnel; but that simply does not accord with the facts.  What is not in dispute is that before Hing Hung became the Duty Manager (at least since 2001), the said post had actually been filled by a member of a different fong every year.  Other than claiming that it was by coincidence that every year a member of a different fong happened to take the initiative to indicate his intention to the outgoing Duty Manager and succeed in taking over, Kam Fai did not offer any explanation.

28.  Even in the case of Hing Hung, he stepped down as Duty Manager after one year and was replaced by Kam Fai of the same fong.  Regardless of whether Kam Fai was interested in the post, what seemed to be the case was that Hing Hung did not lose interest in becoming a Duty Manager again, since Kam Fai claimed that he again handed over the job and the relevant records and documents to Hing Hung in 2007.  In his defence dated 22 July 2008, Hing Hung effectively acknowledged that descendants of Man Chiu Pui fong should take over as Duty Manager at the ancestral worship at Chung Yeung Festival of that year.  If what Kam Fai said was true, why would Hing Hung have this understanding?

29.  There is no dispute that the Duty Manager is entitled to remuneration out of the rental income from landed properties.  Kam Fai did admit to receiving a yearly remuneration of HK$5,000.  As the post of Duty Manager involves the handling of rental income from the Tso’s land out of which remuneration may be drawn, disputes might arise among the various fongs.  However, Kam Fai claimed that when he took over from Hing Hung, they did not even consult other members, nor was his appointment confirmed.  As submitted by Mr Tsui, things did appear to have been taken a little too lightly.

30.  Since his appointment as the Manager of the Tso some fifty years ago, Kwok Wai has been living overseas for many years.  In addition, his testimony about the Duty Manger system may not be very clear despite his firm stance in court.  That, however, does not affect the credibility of his evidence.  I accept what he said about the Duty Manager system and reject Kam Fai’s evidence in that regard.

The Income and Expenditure Accounts

31.  Regardless of whether the post of Duty Manager is filled by a representative of each fong by yearly rotation, or whether Hing Hung has breached that tradition by privately handing over to Kam Fai, the fact remains that both of them successively carried out the responsibilities of Duty Manager.  That being the case, they are naturally under a duty to account to all members of the Tso for the income and expenditure accounts relating to the letting of the land during the period when they were respectively the Duty Manager.

32.  Kwok Tong pointed out that in 2003, i.e. before Hing Hung was appointed as Duty Manager, the Tso received rental income in the sum of HK$ 5,000 and HK$ 26,000 respectively from the two lots.  Kam Fai, however, asserted that since his appointment, i.e. from 2005 onwards, there had not been that much rental income.  He submitted a letter dated 14 July 2007 apparently issued by a Man Wai Cheong of Wang Tat Development Co. Ltd, which was enclosed with a “Detailed List of Rent”.  Wang Tat was the purported lessee of the lot owned by “Man Shui Tong Wui” mentioned above and was also responsible for distributing the rent payable to the Wui directly to the beneficiaries, including the Tso which owns a 0.5/48 share.  Wang Tat set out in the letter that the list was prepared on Kam Fai’s request.  Man Wai Cheong did not appear in court to explain the list he prepared.  In the absence of the relevant records and documents from Kam Fai, members of the Tso were simply unable to verify the assertions contained in the list.

33.  According to Kam Fai, the practice was that a distribution would only be made if the remaining balance, with expenses deducted, was large enough to allow for HK$100 to be given to each ding.  Yet he also claimed that in 2006 or 2007, he did distribute HK$30 to each ding upon members’ request.  Kwok Wai and Kwok Tong categorically denied that there had ever been such distribution.  On the other hand, Kam Fai claimed that when he handed over his duties and documents to Hing Hung in 2007, he had handled the accounts but he could not even tell what the remaining balance was at that time.

34.  What must be noted is that under the claim in this action, members of the Tso are not required to adduce evidence to prove the actual amount of money that Hing Hung and Kam Fai have each defaulted in paying the members by way of distribution.  What they need to prove is that the two of them are legally liable to provide for inspection the records relating to the income and expenses and the rental income from the lots during the period when they were respectively the Duty Manager and account for the same.  Then based on the result of the inspection of accounts they should pay to members the amount they have defaulted in paying (if any).

35.  Kam Fai claimed that whenever he came across a member of the Tso he would conveniently give them an oral account.  He also claimed to have posted accounts documents at the ancestral hall for members’ reference.  Kwok Tong did not rule out that Kam Fai might have given an oral account to individual members, but he categorically denied that there had ever been such posting of accounts documents.  Kam Fai did not, however, either by himself or through Hing Hung, provide any documents to support his assertion.  As it has always been the practice for distribution to be done in the week after the Chung Yeung Festival every year, and given the Tso has about 100 members, the so-called account given by Kam Fai is, in my view, too casual and implausible.  In any event that cannot be regarded as reasonable performance of his duty and certainly cannot be used as an excuse to evade his liability to account.

The relevant records and documents

36.  Kam Fai claimed that he had handed over the relevant records and documents to Hing Hung who took up the post again, but Hing Hung refused to provide such documents and give an account.  Judgment has been entered against Hing Hung for his failure to comply with the unless order made by the court earlier.  Regarding the inspection of the relevant records and documents, which members of the Tso are obviously entitled to request, Hing Hung and Kam Fai again shifted the responsibility onto each other.  Even at trial they still refused to disclose copies of those documents.  In my opinion, it was irresponsible for them to take such attitudes and actions, irrespective of whether they have in fact defaulted in making any distribution.  In these circumstances, I do not accept that Kam Fai could evade his liability to account and provide the relevant records and documents.

Order

37.  I enter judgment in favour of the Plaintiff for the relief claimed and order that:

(1) Kam Fai do account to the Plaintiff side (i.e. Kwok Tong and all other members of the Tso represented by him) for the rental income respectively obtained from the two parcels of land situated at Lot No. 2938 in Demarcation District No. 102 and Lot No. 764 in Demarcation District No. 99 (of which the Tso owns a 0.5/48 share) during the period when he was the Duty Manager in 2005, 2006 and 2007 and any outstanding amount owed to the Plaintiff side;

(2) Kam Fai do pay to the Plaintiff side the amount disclosed after the inspection of accounts described in paragraph (1) above together with interest thereon calculated at judgment rate from the institution of these proceedings until full payment;

(3) Kam Fai do provide to the Plaintiff side all the books and accounts documents relating to the rental income described in paragraph (1) above in his possession or power (including “the relevant records and documents” defined above);

(4) the Plaintiff may, if necessary, apply to the court for further directions within 60 days from today in respect of the inspection of accounts described in paragraph (1) above;

(5) I make a costs order nisi that Kam Fai pay to the Plaintiff side the costs of this action against him, including costs reserved, with counsel’s certificate, to be taxed if not agreed. The order nisi will become absolute unless either party applies to be heard on the question of costs within 14 days from today.

Postscript

38.  Now that the court has already made the above orders, I expect that the two defendants should stop shifting the responsibility onto each other.  They should rather be fully co-operative and arrange for the handing over of the relevant records and documents, thereby fulfilling their responsibility to account to the Tso for the income and expenses relating to the letting of the land during the period when they were respectively the Duty Manager.  Otherwise, the Plaintiff side would have to seek further directions from the court to proceed with the inspection of accounts, which would only lead to more waste of money and resources.

Mr. Wilfred C.K. Tsui, instructed by Messrs. Kitty So & Tong, for the Plaintiff

The 2^nd Defendant appearing in person, present

Translated by the Judgment Translation Unit of the Judiciary and approved by Mr. P. Y. Lo, Barrister-at-law.