XCHRX MAN FOR TAI AND OTHERS v. MAN PING NAM AND OTHERS

HCA 7935/98

IN THE HIGH COURT OF THE HONG KONG

SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

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J U D G M E N T

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Applications in the Action

1. This is an application in A7935/98 ("the Action") by :-

- William Man For Tai 文伙泰 (also known as Man Shui Tai 文水泰) - Man Fong Hang 文晃恆 and

- Man Tim Sung 文添送 (also known as Man Sung Chi 文送池) (collectively referred to as "the surviving Man brothers") for a representation order under Order 15 rule 13 of the Rules of the High Court that Man Fong Hang represent the interests of all persons who have or may have an interest under Chinese law and custom in :-

(a) the estate of Man Mou Hei 文戊喜

(the father of the surviving Man brothers),

(b) the estate of Man Yat Kwai 文日葵 (the elder brother of the surviving Man brothers),

(c) Man Mou Hei Tso 文戊喜袓 and

(d) Man Mou Hei Tong 文戊喜堂.

2. There is also an application in the Action for summary judgment for the sum of HK$15,549,195, being part of the proceeds of sale of property belonging to an entity known as the Man Shek Chung Wui 文石涌會 ("the Wui").

3. The Defendants in the Action are the managers of the Wui ("the Managers"). The Managers' case is that the amount in question should be paid to "Man Mou Hei Tong", but they do not accept that the surviving Man brothers are members of "Man Mou Hei Tong". The Managers deny that the estate of Man Mou Hei, the estate of Man Yat Kwai, or "Man Mou Hei Tso" is entitled to the proceeds.

The Originating Summons

4. Two days before the writ was issued, the Managers issued an Originating Summons, with the surviving Man brothers and the widow of Man Yat Kwai as the defendants.

5. At the call-over hearing of this Originating Summons, the Managers gave an undertaking to this Court to make payment of the amount in question (together with accrued interest) into Court. This has been done. The effect of payment in is that under s.62 of the Trustees Ordinance cap. 29,

"(1) trustees ... having in their hands or under their control money ... belonging to a trust may pay the sum into court, and the same shall, subject to rules of court, be dealt with according to the orders of the court.

(2) The receipt or certificate of the proper official shall be a sufficient discharge to trustee for the money ... so paid into court."

Procedure

6. At the call-over hearing of the Originating Summons, I had also given directions that the Originating Summons should be heard together with the action. Although not listed, the Originating Summons has been heard together with the summons in the Action without objection from any of the parties. I should also record that more evidence has been adduced by the parties since the call-over.

7. Since the Originating Summons concerned a trust, it was appropriate for the matters to heard in chambers.

Facts

8. I shall now examine the facts (as disclosed in the evidence) in chronological order. In examining the facts, I have borne in mind that under the Originating Summons procedure, the burden is not thrown on the defendants as in a summary judgment application under the Writ procedure. In considering the matters before me, I have not approached the issues on the basis that the Managers bear the burden.

9. In my judgment, even adopting the approach that it is for the surviving Man brothers to bear the burden of proving their case, it is clear from the evidence that the estate of Man Mou Hei is entitled to the said proceeds of sale.

Man Mou Hei

10. The documentary evidence shows that in 1945, Man Mou Hei acquired 1 shek 石 of property which was part of the Wui for HK$1,200. This is evidenced by a deed in Chinese that had been produced by one of the sons of Man Yat Kwai, who had found the document amongst his father's papers.

11. In 1962, Man Mou Hei acquired a further 1/2 shek of property which was part of the Wui for $550. This is also evidenced by another deed in Chinese, also found in similar circumstances.

12. The 11/2 shek referred to in the 2 Chinese deeds correspond to the portion that was attributed to Man Yat Kwai, Man Mou Hei Tong and Man Mou Hei Tso in documents of the Wui since 1972. There was no documentary evidence of the membership of the Wui before 1972 (Man Mou Hei died in 1966).

13. As for the Managers' case on Man Mou Hei's membership of the Wui, it should be noted that Man Ping Nam, one of the Managers, has been a manager of the Wui since 1949. He did not leave Hong Kong until 1952. During that period, as a trustee, he would have had knowledge of the membership of the Wui, and if Man Mou Hei was not a member, one would expect Man Ping Nam to say so directly. He has not done so.

Man Yat Kwai

14. The Rental Distribution Book of the Wui 租務部starting in 1972 does not include Man Mou Hei's name, but records Man Yat Kwai's name against 11/2 shek.

15. However there is no evidence of how Man Yat Kwai acquired this 1 1/2 shek. Certainly there is no documentary evidence that Man Yat Kwai bought it from anyone, in contradistinction to Man Mou Hei's acquisition, as evidenced by the 2 Chinese deeds.

16. Further, there is no evidence that Man Mou Hei had transferred his interest to Man Yat Kwai alone amongst his 4 sons.

17. More importantly, Man Yat Kwai's name was recorded in the Wui's documents for only 1 year. The next year, the 1 1/2 shek's owner was recorded as "Man Mou Hei Tong", and Man Yat Kwai's name was never again listed as an owner.

18. Man Yat Kwai knew of this change in the records of owners. He was one of the managers of the Wui from 1949 up to the time of his death in 1992, and according to Man Ping Nam, he controlled the affairs of the Wui to a large extent. He also signed receipt for the rents distributed by the Wui on the Rental Distribution Book where the owner was recorded as "Man Mou Hei Tong".

19. Clearly therefore, either Man Yat Kwai had initiated the change in the records in 1973, or at the very least he must have known of it. Either way, there is clear evidence of his acknowledgement that he personally had no claim to the 1 1/2 shek, a position that the administrator of his estate accepts.

"Man Mou Hei Tong"

20. The words "Man Mou Hei Tong" first appeared in the Rental Distribution Book of the Wui in 1973. There is no documentary evidence as to how it got there - there is no evidence of any applications for transfer of the 1 1/2 shek into this name, nor is there evidence that the Managers had been informed of the establishment of such a tong in the proper Chinese customary law sense of the word, as an ancient Chinese device or form of landholding.

21. Indeed, it is clear from the evidence that no "Man Mou Hei Tong" has ever been registered with the Tso Tong Registry, and no-one has ever been registered as its manager.

22. From 1973 to 1976 inclusive, "Man Mou Hei Tong" was recorded as owner of the 1 1/2 shek. As referred to above, the receipts for the rents distributed by the Wui were signed by Man Yat Kwai, but in no instance had Man Yat Kwai purported to do so as "manager" of such a tong.

"Man Mou Hei Tso"

23. In 1977, the words "Man Mou Hei Tso" appeared as owner of the 1 1/2 shek in the Rental Distribution Book. There is no documentary evidence as to how it got there, and none of the Managers can throw any light on this either.

24. Similarly with "Man Mou Hei Tong", no such tso has ever been registered with the Tso Tong Registry, and no-one has ever been registered as its manager.

25. Man Yat Kwai signed the receipts for the rents distributed, but again in no instance did he purport to do so as "manager" of any such tso.

26. "Man Mou Hei Tso" appeared in the Rental Distribution Book as owner of the 1 1/2 shek from 1977 to 1982 inclusive.

27. In 1981, an Owners Booklet 業主部 was printed and distributed by the Wui to the owners of the Wui. One such booklet for 1 1/2 shek was addressed to “Man Mou Hei Tso".

28. In 1983, however, “Man Mou Hei Tong" was recorded in the Rental Distribution Book again as the owner of the 1 1/2 shek. Again there were no applications for transfer. Further, although Man Ping Nam was in Hong Kong in 1983, he has not shed any light on the circumstances surrounding this change from “Man Mou Hei Tso" to "Man Mou Hei Tong".

29. "Man Mou Hei Tong" has remained in the Wui's documents as the recorded owner of the 1 1/2 shek, save for one instance in March 1992 when the Managers submitted an application to the District Office for the sale of the Wui's property. The application contains a reference to a "Members List" which was attached. This took the form of a "Power of Attorney" which was signed by some members and not by others. In this "Members' List", "Man Mou Hei Tso" not "Man Mou Hei Tong" was recorded as an owner.

Findings

30. It is in my judgment clear from the evidence before this Court that the estate of Man Mou Hei is the owner of the 1 1/2 shek. One starts with the primary evidence of ownership, i.e. the 2 Chinese deeds which evidenced Man Mou Hei's purchase of the 1 1/2 shek.

31. In this connection, I have noted that the 1 1/2 shek do not appear in the schedule to the Letters of Administration of Man Mou Hei's estate. Man Fong Hang has sought to explain this in his Affirmation by saying that it was thought that he "need not deal with it" because it was thought that the interest would be dealt with "by reference to customs and practice" of the village. (In any event I note that the Letters of Administration were only granted in 1988, when Man Mou Hei had died in 1966, so it cannot be said that the administrators had been energetic in complying with administration procedures.)

32. I find that Man Yat Kwai did not own the 1 1/2 shek. There is no evidence that he had bought the 1 1/2 shek from his father, nor any other evidence of any transfer from his father in the father's lifetime. In any event, it is clear from Man Yat Kwai's conduct in the nearly 20 years from 1973 (when the name of the owner in the Wui's Rental Distribution Book was changed from "Man Yat Kwai" to "Man Mou Hei Tong") to 1992 (when Man Yat Kwai died) that he has disavowed any personal claim to the 1 1/2 shek.

33. As for "Man Mou Hei Tong" and "Man Mou Hei Tso", it would appear from :-

(a) the way that "Man Mou Hei Tong" was recorded in the Wui's documents as owner from 1973 to 1976, then changed to "Man Mou Hei Tso" from 1977 to 1982, then back to "Man Mou Hei Tong" from 1983 to date, and yet recorded as "Man Mou Hei Tso" in the 1992 List submitted to the District Office;

(b) the fact that the same person, Man Yat Kwai signed receipts on behalf of both "Man Mou Hei Tong" and "Man Mou Hei Tso";

(c) neither "Man Mou Hei Tong" nor "Man Mou Hei Tso" has ever been registered in the Tso Tong Registry; and

(d) the lack of any transfer documents between "Man Mou Hei Tong" and "Man Mou Hei Tso"

that "Man Mou Hei Tong" and "Man Mou Hei Tso" were used interchangeably. There is no other acceptable explanation for the manner in which "Man Mou Hei Tong" and "Man Mou Hei Tso" appeared from time to time in the Rental Distribution Books.

34. It would follow from that that "Man Mou Hei Tong" was not a "non-lineage" tong (such as a business tong) as postulated by the Managers' expert Mr Anthony Dicks. I accept that there could be "non-lineage" tongs. But the fact that "Man Mou Hei Tong" was used inter-changeably with "Man Mou Hei Tso" in this case shows that if there had been a "Man Mou Hei Tong", it would have been a lineage tong, because a tso is a form of landholding that is open only to descendants of a common ancestor.

35. In my judgment, however, the owner of the 1 1/2 shek was neither "Man Mou Hei Tong" or "Man Mou Hei Tso", because there were no such entities in the proper Chinese customary law sense of the terms. Neither has ever been registered in the Tso Tong Registry. The evidence of the surviving Man brothers is that no such tong or tso was ever established. Their evidence is that the addition of the words "tong" or "tso" was simply to signify that the 1 1/2 shek belonged to their late father, used as in "the estate of Man Mou Hei".

36. I have taken into account the fact that in earlier correspondence between the parties' solicitors, in particular a letter dated 21 April 1998 from Au Kong & Tang and a letter dated 13 May 1998 from Baker & McKenzie, that the surviving Man brothers and the widow of Man Yat Kwai claimed to be "all the beneficiaries of the Man Mou Hei Tong". Further, there is an allegation that Man For Tai claimed to be the registered manager of the Man Mou Hei Tong at a meeting with the Managers' solicitors on 8 May 1998. Man Fong Hang has sought to explain these claims in his evidence.

37. It may be that those previous claims were due to a different interpretation of the term "tong", or it may be that that position was taken inappropriately for reasons of expediency.

38. But be that as it may, the evidence is that "Man Mou Hei Tong" or "Man Mou Hei Tso" has never been registered, and yet Man Mou Hei and Man Yat Kwai had registered other tongs of which they were managers.

39. Man Mou Hei had registered his business Hop Yick Lung as a tong as early as 1954, so if he had wished to set up a "Man Mou Hei Tong" in the proper Chinese customary law sense of the word, no doubt he would have done so before his death in 1966.

40. Man Yat Kwai was of course the manager of the Wui itself, as well as the manager of Hop Yick Lung after Man Mou Hei. Again, if he had wished to set up a "Man Mou Hei Tong" or a "Man Mou Hei Tso" under Chinese customary law, he would have done so between 1973 and 1992.

41. The fact that they had registered other tongs, and not a "Man Mou Hei Tong" or "Man Mou Hei Tso", strongly supports the conclusion that no such tong or tso ever existed.

42. Further, it would have been most unlikely that Man Mou Hei or Man Yat Kwai would have set up a tong or a tso without the knowledge of the surviving Man brothers, being closely related, when the surviving Man brothers had been involved even in a "business" tong, Hop Yick Lung.

43. Moreover, it is to be noted that if the "Man Mou Hei Tong" was a tong in the proper Chinese customary law sense of the word, one would have expected the Managers of the Wui to have dealt with its manager(s). However, the evidence is that the Managers of the Wui were prepared to deal with a number of different persons as "owners", viz. Man For Tai, Man Tim Sung, Man Fung Wing 文風榮 and Man Fung Shek 文風石, when none of them had any personal share in the Wui and none had been appointed manager of "Man Mou Hei Tong" or "Man Mou Hei Tso".

44. The common factor amongst all these persons was, of course, that they are all successors to the estate of Man Mou Hei. And the view that it was the estate of Man Mou Hei which is entitled to the proceeds of sale is consistent with the manner in which the letter regarding sale of the Wui's property was addressed, not to "the managers of Man Mou Hei Tong", but to "the sons and grandsons (or descendants) of Man Mou Hei Tong" 文戊喜堂子孫.

45. In all the circumstances, I find that the owner of the 1 1/2 shek was (in his lifetime) Man Mou Hei, and (upon his death) his estate.

46. It is therefore not necessary for me to make a representation order, as Man Fong Hang is the surviving administrator of the estate of Man Mou Hei.

Orders

47. In respect of the Action, I would therefore dismiss the application for an order under O.15 r.13 but I would give final judgment to the 2nd Plaintiff as administrator of the estate of Man Mou Hei in the sum of $15,549,195 together with interest thereon. The sum is to be paid by way of an order for payment out referred to below.

48. As far as the rate of interest is concerned, counsel for the Managers has informed the Court that the sum had been placed in a savings account prior to payment into Court. Counsel for the 2nd Plaintiff wishes to consider this aspect further, and I would give liberty to both parties to apply in relation to the rate of interest.

49. In respect of the Originating Summons, the questions posed have been postulated on the basis that "Man Mou Hei Tong" was a form of landholding under Chinese customary law. In the light of my findings that there was no such tong, the answers to the questions are:-

(1) No;

(2) No;

(3) No; and

(4) Not applicable.

50. I would order payment out of the sum in Court to the 2nd Defendant in the Originating Summons, Man Fong Hang, as administrator of the estate of Man Mou Hei.

51. Finally as for costs, counsel for the Managers has asked that their costs be paid out of the trust funds pursuant to Order.62 rule.6(2) Rules of the High Court. Counsel for the surviving Man brothers has objected to this form of order. He submits that the Managers have been deliberately obstructive, because the surviving Man brothers have questioned the value at which the Managers have sold the land. A claim for damages for breach of fiduciary duty remains a live issue on the pleadings in the Action.

52. In my view, the Managers were entitled to put the surviving Man brothers to proof of their claims to entitlement to the sum in question, given the various capacities in which they were claiming entitlement.

53. I note in particular the assertion by the surviving Man brothers and the widow of Man Yat Kwai that they were the "only" members and the "beneficiaries" of "the Man Mou Hei Tong", which can reasonably be interpreted as an assertion of the existence of such a tong in the proper Chinese customary law sense of the word.

54. Further, the reference in the Affirmations filed by the surviving Man brothers to "Man Mou Hei Tong" or "Man Mou Hei Tso" being an "alias" of Man Mou Hei is confusing. The common understanding of an "alias" is that it is another name assumed by a person. But there was no evidence that Man Mou Hei ever assumed the name of "Man Mou Hei Tong" or "Man Mou Hei Tso".

55. Moreover, the pleadings referred to "designations" of beneficial ownerships of land interest by Man Mou Hei, and by Man Yat Kwai. This aspect was abandoned, but only at the hearing before me. Prior to the abandonment of that case, those pleadings of "designation" served only to confuse.

56. It may or may not be that the Managers are hostile to the surviving Man brothers by reason of the latter's stance on the value of the property. That is a matter for another day. But any trustee (especially one with a sum of more than $15m in his hands) faced with confusing positions, such as I have referred to above, would wish to be covered by a Court order before making payment, and it would only be proper for a trustee to assist the Court in its deliberations on the matter.

57. Accordingly, taking those matters into account and in the exercise of my discretion on costs, I would make an order nisi that the costs of the surviving Man brothers and of the Managers in both the Originating Summons and the Action be paid out of the trust funds. However I would note that if costs are not agreed, the Managers' costs should be taxed on the basis that only those costs should be allowed which would have been expended by a trustee doing no more than putting claimant beneficiaries to proof, and not adopting any other position.