LAU YUE KUI v. LAU LEUNG CHAU AND OTHERS

1995, No.MP3924

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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I. Facts

The Family

1. Lau Wai Chau (劉維疇) ("the Ancestor") was born in 1864 and died on 18th August 1933. He was a very successful man. He operated fish markets under the names of Shing Mei and Shing On at Kwong Hoi in Toi Shan, Guangdong, China. He owned properties in China. Later in his life, he came to live in Tung Shing Lei (東成里), Yuen Long, New Territories. He purchased land in the New Territories in the area of Tung Shing Lei. He had five wives, namely Chan Shi (陳氏), Lee Shi (李氏), Lam Shi (林氏), Pang Shi (彭氏) and Chui Shi (徐氏). He had eight sons. The order of seniority of the eight sons are : 1st, Leung Kei (良騏), 2nd, Leung Sheung (良驤), 3rd, Leung Chau (良騶), 4th, Leung Chun (良駿), 5th, Leung Kwai (良騤), 6th, Leung Chung (良驄), 7th, Leung Kui (良駒), 8th, Leung Wa (良騧).

2. Of the eight sons, seven had died and the eighth son is the only surviving son of the Ancestor. The eight sons have their own families. For the purpose of this case, I shall refer to some of the male descendants of the eight sons who were featured in this case.

Yu Hi (汝器) was the son of the 2nd son . The 1st son predeceased the Ancestor and Yu Hi was adopted to continue the line of the 1st son.

Yu Woo (汝瑚), Yu Foon (汝寬) and Yee Pang (汝彭) were the sons of the 2nd son.

U Kwan (汝琨) and Yue Kok (汝玨) are the sons of the 3rd son.

Yu Chun (汝珍) and Yu Kui (汝蘧) are the sons of the 4th son.

Yu Chang (汝璋), also known as Albert Yee, is the son of the 5th son.

Dr Lau Yu Chiu (汝超) is the son of the 6th son.

Yu Shing (汝城) is one of the sons of the 7th son.

Yue Sum (汝琛) is one of the sons of the 8th son.

Kin Shun (堅信) or Freeman Lau is one of the sons of Yu Chun.

3. I shall refer to the families of the eight sons as the eight Fongs (房).

English Will

4. The Ancestor made an English Will dated 11th July 1930. In that Will the Ancestor appointed his three eldest sons, namely the 2nd, 3rd and 4th sons as the executors. Although they were also named as the residuary legatees, it is common ground between the parties that the three sons were not intended to take the residual estate beneficially.

1932/1933 Division

5. In about 1932, the Ancestor divided some of his properties in the New Territories into nine parts. Each of his eight sons (the 1st son was represented by Lau Yu Hi) was given one part. The 9th part was given to his three eldest sons expressly on trust for himself. The Division of Properties was registered in the District Land Office on 23rd May 1933 under Memorial No.86289.

Chinese Codicil

6. The Ancestor made a Chinese Codicil dated 4th March 1932 ("the Codicil"). I shall deal with the terms of the Codicil later on.

1946 Division of family property

7. At the time of the Ancestor's death, his properties included land, buildings and business in China and his land and buildings in Tung Shing Lei. The Ancestor had built houses at the centre of Tung Shing Lei. His eight sons and their families shared the use of four of the houses. The fifth house is the ancestral hall. The Ancestor's land in Tung Shing Lei were registered in the names of others : properties held upon trust by his three eldest sons for him; properties registered in the names of his 2nd, 3rd, 4th, 7th sons and his wife Lau Pang Shi.

Discord within the family

8. After the death of the Ancestor, his properties were managed by the three sons. However, it appeared that the 2nd son, who was the eldest, was collecting all the rents of the Ancestor's properties during the Second World War and refusing to share them with the other Fongs (except the 1st Fong who was his natural eldest son). Disputes arose between the family members. After the Second World War, the eight Fongs decided to divide the undivided properties of the Ancestor amongst themselves while retaining one portion of the land in Tung Shing Lei including the ancestral graves, the ancestral hall, the four houses and the surrounding land as common property and for ancestral worship.

The Draft Property Division Book

9. The proposal for division was contained in a Chinese document dated 1945 and entitled "Draft Property Division Book", ("the Draft Division"). It was signed by the 2nd , 3rd and 4th sons. The properties were divided into eight parts, each of about HK$6,500 in value with a description as to the properties and their values and reserving a ninth part. Although the recital of this document did not refer to the dispute of the family members, it did hint of the discord :

"On September 2, 1945, the Second World War ended. We, the brothers, who left home because of the war and wandered about have gathered again. As the fields and plantations have gone out of cultivation for a long time, all of our brothers feel it will not be easy to put them in order although we would exert our greatest efforts. Seeing that the times have changed and we hold different opinions, although there has been an example of moral excellence to follow that the revered Mr Cheung (a fabled person) managed to have nine generations live in the same household and now no one has agreed to this, all of us, the three trustees appointed according to the will of Ancestor Wai Chau, hereby propose to divide the undivided properties, fields, fish ponds and business left over by Ancestor Wai Chau's Hak Sut Tong so that everyone of us may part company with each other and manage our respective estate for our own. Thus we can eliminate any suspicion or jealousy among us, which is much better than mutual tolerance or any intention of mutual harm."

The Draft further provided that -

"1. On November 23, 1945 (Republic Of China Year 34), the further division of the family's properties among the eight families of the brothers under Lau Hak Sut Tong was determined by Leung Sheung, Leung Chau and Leung Chun, the three trustees appointed according to the will of ancestor Wai Chau, with the consent of the brothers for the purpose of exercising the right to accept the heritage."

"14. All the properties divided shall be registered in the names of the male family members."

The younger members of the family, namely the 8th son and Dr Lau Yu Chiu ("Dr Lau") who was the only son of the 6th son who had since died, were then asked to copy the proposed division into duplicate copies.

The Event

10. The actual division took place in 1946. The initial decision apparently taken by the 2nd son or the three elder sons was that the eight divided parts would be picked by the order of the seniority of the eight Fongs. However, this was objected by the junior Fongs, namely the 7th son, the 8th son and Dr Lau. The three eldest sons were inside the 2nd son's house, while the representatives of the junior Fongs refused to go in. The 5th son had emigrated to the United States and was represented by the 4th son, his only elder brother by the same mother. The 1st Fong was represented by the 2nd son.

11. The three eldest sons backed down from their proposal. The 2nd son suggested that the first two Fongs would pick the properties, while the other six Fongs would draw lots on the remaining six properties. Again the three junior members objected. They agreed that the 2nd son should have the privilege of choosing his share by virtue of his contribution to the family as a manager, but objected to give the same privilege to the 1st Fong since it had made no contribution to the family. Finally, the three eldest sons agreed that the 2nd son would choose his desired property whilst the others would draw lots according to seniority. The three junior members then entered the house to carry out the division. The eight Chinese words 「天、地、玄、王、宇、宙、洪、荒」were written on eight pieces of paper so as to represent each of the eight parts of the properties which were to be divided. The pieces of paper were rolled into balls and put into a tall vase. The seven Fongs then took turn, according to their seniority, to pick the paper by a pair of long chopsticks. The 2nd son selected his properties first and then he drew the lot for the 1st Fong, the 3rd son did it himself, the 4th son did it himself and for the 5th son. Dr Lau did it for the 6th Fong and the 7th son did it himself. The 8th son, of course, had no choice but to accept the remaining properties.

Deed of Confirmation

12. The allocation was then recorded in a Chinese document entitled "Deed of Confirmation of Division of Assets for Descendants of Ancestor Lau Wai Chau of Lau Hak Sut Tong" ("The Confirmation Deed"). There were eight duplicate copies with a ninth copy for common custody. The document recorded the description and value of the eight parts and to which Fong it belonged. It stated that,

" In Republic Of China Year 35 (1946) when the Second World War just came to an end, we, the brothers, felt that most of us could not adapt ourselves to a collective economic life. Therefore, despite our late father's teachings which were difficult to follow, we have today firmly decided as swiftly as by one cutting apart by his properties formerly under the name of Hak Sut Tong and Ancestor Wai Chau among us for our respective permanent domain and management except for a small portion to be reserved for the payment of the future taxes and levies for the houses and plots."

Each of the eight duplicate copies were signed by the following :

1. 1st Fong:	Yu Hi, signing himself
2. 2nd Fong:	Leung Sheung, signing himself
3. 3rd Fong:	Leung Chau, signing himself
4. 4th Fong:	Leung Chun, signing himself
5. 5th Fong:	the 4th son Leung Chun signing on behalf of the 5th son Leung Kwai who then was not in Hong Kong
6. 6th Fong:	Dr Lau, signing himself
7. 7th Fong:	Leung Chung, signing himself
8. 8th Fong:	Leung Wa, signing himself

One duplicate copy was given to each Fong and the front cover of the duplicate copy stated the name of the designated Fong.

Deed of Family Arrangement

13. On 20th March 1946 a "Deed of Family Arrangement" ("the DFA") was prepared by a firm of solicitors, Messrs Hastings & Co., recording the division and setting out the allocation of the eight parts and the ninth part. The ninth part was held by the eight beneficiaries, namely Lau Yu Hi, the 2nd, 3rd, 4th and 5th sons, Dr Lau, the 7th and 8th sons, on trust in rotation as common property and for ancestral worship.

14. The DFA was signed, sealed and delivered by the 2nd son as guardian of Lau Yue Hi, the 2nd son by himself, the 3rd son and the 4th son by themselves, the 4th son as agent for the 5th son, Lau Chan Chuk Ling (the natural mother) as guardian of Dr Lau who was then aged 15, the 7th son by himself, and the 8th son (then aged 18) by his natural mother Lau Pang Yiu Man as his guardian.

15. Shortly thereafter, the eight Fongs completed taking possession of the divided properties. The individual parts which were allocated to the eight Fongs and the 9th part are shown in the coloured map (Exhibit P3). The correlation of the land described in the DFA such as farm, fish ponds and saltwater paddy field with their actual lot numbers is clearly shown in the transparent films at pages 83 and 84 of Bundle H.

Probate

16. Letters of Administration with Will annexed of the estate of the Ancestor was granted to the Plaintiff on 8th June 1995. Probate of the estate of the 4th son was granted to the Plaintiff on 24th February 1994. The Plaintiff is one of the sons of the 4th son. Some of the Defendants challenged the Plaintiff's entitlement to obtain grant of representation of the Ancestor's estate. Probate action has been commenced against him in this connection.

II. Two proceedings

17. There are two proceedings before me and I will briefly deal with the nature of the two proceedings.

The 1995 Proceedings

18. Some of the land in the schedule of the DFA had been resumed by the Government in 1989, 1993 and 1995 respectively. The lot and D.D. numbers, and the relevant gazette notice numbers are as set out in the table Annexure IV of the Plaintiff's Notice to Admit Facts. Very briefly, the 1989 resumption was in respect of land of the 8th Fong. The 1993 resumption was in respect of the land of the 4th Fong. The 1995 resumption was substantial, it affected about 22% of the total area of the land belonging to the 1st, 4th, 5th, 6th and 8th Fongs. In 1980 and 1981, some smaller pieces of land under the DFA were resumed by the Government.

19. After the Plaintiff obtained grant of letters of administration to the Ancestor's estate, he proceeded to negotiate with the Government to collect the cash compensation arising out of the 1993 and 1995 resumption. There was a time limit imposed on the acceptance of the compensation offer. However, as the land to which the 1993 and 1995 resumption relate are registered in the name of the 2nd, 3rd, 4th and 7th sons, the Government insisted that the Plaintiff obtained vesting orders of these resumed lands as pre-condition for releasing compensation. The Plaintiff commenced the 1995 proceedings seeking, inter alia, vesting orders of the land and also the distribution of the cash compensation and the unresumed portion of the Ancestor's land in accordance with the provisions of the DFA.

20. On 31st January 1996, the Plaintiff obtained virtually most of the relief sought in the Amended Originating Summons, except the order for distribution which was not proceeded with.

21. The Defendants then applied to set aside the order. At the hearing before Seagroatt J. on 12th December 1996, the parties reached a compromise to allow the previous orders to remain in force subject to the variation that the Plaintiff had to pay back into court $8.1 million out of cash compensation which he previously obtained payment out. (There was later further agreements on the money in court.) The compromise was without prejudice to the rights of the parties. The object of the compromise was to enable negotiations on compensation between Vickers on behalf of the estate and the Government in relation to the 1995 resumption to continue without interruption.

22. Because some of the resumed lands are held in the registered name of Lau Pang Shi, so her estate was joined in the 1995 proceedings as well. The 8th son is named as the Personal Representative of her estate.

The 1996 proceedings

23. These proceedings were commenced on 19th September 1996. The Plaintiff as the Administrator of the Ancestor's estate and executor of the Will of the 4th son, joined all the other seven Fongs as Defendants. The foremost declaration sought in these proceedings is that the properties be distributed in accordance with the provisions of the DFA.

III. The position of the parties

The 1st, 2nd and 4th Fongs

24. The Plaintiff (4th Fong) says that the properties of the Ancestor, which were not divided among the eight Fongs in the 1933 division, were subsequently divided amongst the eight Fongs and recorded in the DFA. He seeks to upheld the validity of the DFA.

25. The 4th Fong is supported by the 1st Fong (represented by the 1st Defendant) and the 2nd Fong (represented by the 2nd Defendant). These two Fongs, however, maintained that they are not engaged in any hostile litigation with the other Fongs.

The 3rd, 5th, 6th, 7th and 8th Fongs

26. On the other hand, the 3rd Fong (represented by the 3rd Defendant), the 5th Fong (represented by the 4th Defendant), the 7th Fong (represented by the 5th Defendant), the 6th Fong (represented by the 6th Defendant) and the 8th Fong (represented by the 7th Defendant) challenged the validity of the DFA ("the opposing Defendants"). Their case can be summarised as follows :

1. An ancestral worship trust was established by the 1933 Division, the English will and the Chinese Codicil. The ancestral worship trust was established during the lifetime of the Ancestor. Alternatively, it was established on his death either in accordance with Chinese law and customs or in accordance with Hong Kong law.

2. The ancestral worship trust could not be revoked or dissolved by the sons of the father.

3. The DFA was invalid.

4. The DFA was not fully carried into effect.

5. It is now too late and inequitable for the Plaintiff to enforce the DFA.

6. The DFA was replaced in 1979 by an agreement of the eight Fongs : they agreed to sell the properties and share the proceeds equally between them.

 

IV. Was an ancestral worship trust established during the lifetime of the Ancestor?

The Codicil

27. The Codicil dated 4th March 1932 stated, among other things, that, "I am now of advanced age and cannot undertake the numerous heavy chores in the family. The achievements of my whole life's hard work and dedication, apart from those already allocated and distributed to each of you to manage hold and develop; the rest, fish ponds and surrounded fields in front of the village together with the paddy fields in the surrounding are still properties under my name, they are to be kept and managed in perpetuity for payment of expenses designated by me before I die, and for the purpose of offering sacrifices to ancestors or gods in the future. Kwong Hoi, Sing Mei Fish Stalls were founded by me. I wish each of you to appreciate that founding and maintaining a business is difficult. Do not disappoint me by allowing the business to wither. As to matters in the family whether important or minor, they should be discussed and decided by 3 persons, namely Leung Sheung, Leung Chau and Leung Chun and their decisions, imporper reproach not allowed. Take note."

28. The Codicil then went on to deal with the last wishes and instructions of the Ancestor :

"My eight sons should manage hold and develop their respective properties. All spending and expenditures are to be borne by each of them. In future, if they become successful and prosperous by founding their own businesses, each of them should keep such businesses and properties as being their own."

This included directing his eight sons to manage and develop their respective properties, providing maintenance to his wives and daughters, provision for the dowry of his daughters, marriage expenses for his unmarried sons and education expenses for his sons.

29. Although the Codicil was dated before the Memorial of the Division of 23rd May 1933, it is likely that the division was effected before the date of the Codicil but was formalised later on. This is clear from the Codicil which referred to properties already allocated and distributed to the sons.

List of Properties

30. Attached to the Memorial of Division were 3 lists of properties that were transferred to the eight sons of the Ancestor and to the Ancestor himself. Of the properties transferred to the Ancestor, the names of his three sons also appeared in English with the abbreviation "T" and in Chinese with the words "司理" (manager).

31. In my view this does not suggest that the properties were held upon trust on an ancestral worship basis by the managers. As can be seen from the lists, properties transferred to the infant sons of the Ancestor were likewise held upon trust for the infant sons. The likely explanation for the appointment of trustees or managers is that it was simply dealt with in this manner because the sons were underage and the Ancestor himself was also of advanced age and he wished his properties to be managed by his three sons. This is consistent with the terms of the Codicil which stated that :

"As to matters in the family whether important or minor, they should be discussed and decided by 3 persons, namely Leung Sheung, Leung Chau and Leung Chun and their decisions, improper reproach not allowed."

These 3 sons were the named managers in the lists in respect of the Ancestor's properties.

Lau Hak Sut Tong

32. There is also one matter which can be disposed of quickly. Many of the properties shown on the lists were registered in the name of Lau Hak Sut Tong. Although it was argued by the Plaintiff that the Lau Hak Sut Tong was merely an alias of the Ancestor, I think the Lau Hak Sut Tong may well be a business tong used by the Ancestor in acquiring properties. However, there simply was no evidence that the purpose of this Tong was for ancestral worship. In any event, the properties held by the Tong were transferred to the named persons in the 1933 Division. Hence there could not be any argument that even before the division of property in 1933, some kind of ancestral worship trust was already in existence in respect of the properties of the Ancestor.

Intention

33. The Defendants argued that the wording of the Codicil showed that the intention was to create an ancestral worship trust. I accept that the intention was there. This is confirmed by the evidence of the experts as well. However, the first hurdle of setting up an ancestral worship trust in the lifetime of the Ancestor was the wording of the Codicil itself. First, the properties remaining after the division were to be used not merely for the purpose of ancestral worship but for other purposes as well, such as the maintenance of his wives and daughters. Second, the Codicil envisaged that the ancestral worship trust, if it was to be established at all, was to be set up after the death of the Ancestor. This is clear from the words, "the properties are to be kept and managed in perpetuity for payment of expenses designated by me before I die, and for the purpose of offering sacrifices to ancestors or gods in the future". The words "in the future" are to be contrasted with those expenses designated by the Ancestor before his death. Third, the evidence of the experts of the Plaintiff, namely Professor Dicks, Professor Baker and Mr Palmer, which I accept, stated that no ancestral worship trust was created in the lifetime of the Ancestor.

The family property system

34. Before I deal with the experts' evidence on this issue, it is necessary to refer very briefly to the concept of family property in Chinese customary law. Under this system of law, property was attributable to a family group rather than to an individual. The family was a continuum which included both deceased ancestors and unborn future generations as well as living persons. It was the duty of the living members of the family to pass on to their male descendants both the property they had received from their ancestors and such property as they were able to accumulate by their own efforts. It was the male members of the family who were the co-owners of the property, although the female members were entitled to support out of the assets of the family so long as they remain within it.

35. In a household with more than one son, when each son married, he and his wife and eventually their children and grandchildren would constitute a sub-unit within the family known as a "Fong". When a family and its property were divided, the family described ceased to exist either as a social organisation or as a property owning unit. Instead, each of the "Fong" headed by one of the sons became a family in its own right, taking as the common property of its male members a share of so much of the property of the original shares as was divided. The division of family property can take place during the lifetime of the father, either on his own initiative or with his consent. It might also take place after the death of the father, although this was forbidden by the criminal law within the three years mourning period prescribed for parents unless expressly permitted by the dying instructions or will of the deceased.

36. When the family property is divided, a portion called "yang lao fen" ("養老費") can be reserved, the reserved part is used for the support of the aged parents or grandparents following the division of the family property. After the death of the individuals whose support was secured by the "yang lao fen", it was available to be divided among the sons in equal shares, thus completing the division of the whole family estate. The "yang lao fen" can also be used for the maintenance and dowries for unmarried daughters. The "yang lao fen" may also serve another function, namely to nourish the parents of the family not only in life but also after death by means of ancestral sacrifices. In such cases, the undivided property, or part of it, instead of being divided, is retained permanently as undivided common property of the parents' descendants providing an endowment for ancestral worship and other related purposes : see the evidence of Professor Dicks.

Professor Dicks

37. Professor Anthony Dicks, S.C., an expert on Chinese law and custom, said that the wording of the Codicil clearly indicated that the intention of the Ancestor was to create from his remaining properties an endowment in perpetuity for the maintenance of ancestral worship. Under customary law, this appeared to be a valid, as well as extremely common, type of provision in a Chinese will of the traditional sort. He said that executors or administrators or trustees who succeeded them, in reliance on it, could properly have had the properties in question registered in the appropriate district office either in the name of the deceased tong or in the name of its linear descendants (i.e. in one of its own names with the suffix "Tso"), appointing managers in the usual way. In traditional China, the proper method of carrying the deceased's intention into effect would have been to draw up an agreement between all eight Fongs to establish the endowment and to make an official report to the Office of the County Magistrate in accordance with a decree to that effect of the 18th Year of Qianlong, but in the New Territories these formalities were replaced in effect by registration. But as no such steps had taken place, no ancestral worship trust was created in this case.

38. Although Professor Dicks' evidence was in relation to the creation of an ancestral worship trust after the death, in my view what he said equally applies to the creation during the lifetime of the Ancestor : there was no steps taken to set up such an institution. During his lifetime, no steps were taken to register a Tong in respect of the properties intended for ancestral worship.

Professor Baker

39. Professor Baker, another expert, stated that during the lifetime of the Ancestor, he could set up a Tong in respect of property for the purpose of ancestral worship. He would not have set it up in his own name but rather using a special auspicious name. There was no known case of using his own name together with the word Tong. Even when a Tong was set up for ancestral worship, the property was still common property of the family.

40. When the Ancestor registered land in his name with the 3 sons as trustees, this could indicate that the purpose was to create an ancestral worship trust focused on the Ancestor. (For this aspect, I have alredy indicated my view earlier.) He could not use the term "Tso" because it was the word for an Ancestor and therefore inappropriate if applied to a person alive. It might have been the Ancestor's wish that Tso would be added after his death in order to seal a perpetual commitment to worship of his soul. However, there was no evidence that the Ancestor, or after his death, the trustees or his other sons, make any attempt to register the designated land as ancestral worship trust, and if such had been his intention in 1933, it was not carried through to realisation.

Mr Palmer

41. Likewise, Mr Palmer, another expert for the Plaintiff, stated that the Codicil reserved an undivided portion for various uses including payments to wives, sons and daughters and for ancestral worship, but the Ancestor did not establish a Tong or trust because it provided no details that the ancestral worship properties would be managed as a Tong.

Professor Chang

42. Professor Chang, the expert for the Defendants, stated that in a society with strong Chinese tradition a rich person usually invests his money in land, with a wish that it will be kept forever in the family to be enjoyed not only by himself and other living members but also by his ancestors (to whom he owes his life and good fortune) and his future male descendants (by whom his family line is to be continued). The land will be his during his life time but will become 'family property' after his death - something jointly owned by his male descendants and conceptually attached to his family line. He can also make his land his 'family property' during his life time by designating it as 'ancestral worship land' (ji-tian祭田) or 'family charity land' (yi-tian義田) or simply 'family property' (jia-cai家財), register it under an independent name (usually 'so and so tong堂' or 'so and so dzu (Tso) 祖') and place its management in certain manager or managers (si-li司理). A tong or dzu (Tso) can also be created by group of people to commemorate a common ancestor.

43. Professor Chang stated that by the Codicil, the Ancestor intended to make his estate a property with a special character - a "family property" or a "tong property". As the Codicil was signed not merely by the Ancestor but by his other sons and wives, the Codicil was legally adequate to set up an ancestral worship land. He said that the idea that the Ancestor was the focal ancestor was very much a Western concept, it was not necessary to dedicate the land to a particular ancestor since it is for the purpose of worshipping all ancestors. The property that was set aside for ancestral worship was intended to be held on a perpetual basis.

Problem with Professor Chang's view

44. The difficulty with Professor Chang's view is that he also said that under traditional Chinese law and custom, the Codicil, which he described as a Chinese will, was, like all wills, strictly enforceable only if some of the Ancestor's sons so insisted. If all the Fongs unanimously agreed to disregard it and divide the estate, or otherwise cancel the trust, there was no law to prevent them.

45. In an attempt to reconcile this problem, Professor Chang stated that the Codicil was divided into two parts. The part dealing with the provisions for the maintenance of the wives, daughters and infant sons were testamentary in nature, while the other part was for the setting up of an ancestral trust.

46. I do not find that the Codicil was divided into two parts at all. The provisions for the family members and the setting up of the ancestral worship trust were part and parcel of the terms of the Codicil. I have already find that the ancestral worship trust was only to be set up after the death of the Ancestor. It was not possible to know exactly why the sons and the wives put their signatures to this document. Certainly one cannot say categorically they were for the purpose of confirming the setting up of the ancestral worship trust. The Codicil expressly stated that the Ancestor signed it with his left hand, this was most probably due to his physical infirmity and the likely explanation for the signatures of the sons and the wives was merely to confirm that the Ancestor had made the Codicil.

47. Professor Chang also agreed that a person would not use his name to a "Tso" during his lifetime and to set up such a "Tso" during one's lifetime, some independent names would usually be used. There was no evidence that an independent "Tso" was set up during the lifetime of the Ancestor.

48. I am unable to accept the Defendants' submission that an ancestral worship trust had been established during the lifetime of the Ancestor.

V. Was an ancestral worship trust created on the death of the Ancestor?

Chinese Law

49. It is worth examining the nature of a will in traditional China. According to Professor Dicks, the function of wills was largely to transmit morale instructions and precepts for the conduct of family affairs. Where testators make provision for the disposition of property, they normally confine themselves in effect to re-stating the statutory scheme of distribution based on division into equal shares among the sons, sometimes also providing for a "yang lao fen" for widow, providing for infant sons, quantifying maintenance payments for dependants and dowries for unmarried daughters and providing for ancestral worship. Such wills seem very rarely to have departed from the statutory scheme of division of property; rather they tend to reinforce it.

50. Mr Robert Tang, S.C., Counsel for the opposing Defendants, accepted that Chinese law did not recognise testamentary dispositions. I have already referred to the opinions of the experts earlier. No steps were taken by the male descendants to establish the ancestral worship trust. The inevitable conclusion is that under Chinese law, no ancestral worship trust was established on the death of the ancestor.

Setting up of the ancestral worship trust by Hong Kong law

51. Mr Tang argued that even if an ancestral worship trust could not be established by Chinese law on the death of the Ancestor, it could be established under Hong Kong law. In In re Tse Lai Chiu, deceased [1969] HKLR 159 it was held that a Chinese inhabitant in Hong Kong had full testamentary capacity. The case was in respect of a Chinese with land in Hong Kong Island. Mr Tang argued that it would be illogical to hold that a Chinese person had full testamentary power over land situated in Hong Kong island but not in the New Territories.

52. Mr Tang argued that the testamentary power of a Chinese person was recognised even before the 1970 law reform in which Chinese law and customs governing succession on the intestacy of a Chinese dying in Hong Kong was replaced by statutory rules under the Intestates' Estates Ordinance, Cap.73. The reform in 1970 and the subsequent reform in 1995 did not confer any new testamentary power on Chinese persons dying in Hong Kong. The 1995 law reform (see the Intestates Estates (Amendment) Ordinance, Ordinance No.57 of 1995, section 8 and New Territories Land (Exemption) Ordinance, section 8) only changed the rules relating to the distribution of land in the New Territories in the case of intestacy. If a Chinese person has no testamentary capacity over land in the New Territories, it would mean that even today, he is bound to leave the land to his sons and daughters in equal shares, but cannot bequeath the whole of his estate to his widow or make any charitable donation.

53. Mr Tang argued that the subject matter of the ancestral worship trust was sufficiently identified, namely all the properties belonging to the Ancestor, apart from those which had already been distributed to the eight Fongs under the 1933 Division, or alternatively, those specifically mentioned in the Codicil, i.e. "fish ponds and surrounded fields in front of the village together with the paddy fields in the surrounding". These were identified by Mr Lau Leung Wa (8th son) as a reference to all the DFA land.

54. The argument continued that it was not fatal to the establishment of an ancestral worship trust even if it was not registered with the Lands Office because in Tsing time, it was quite common that tso's and tong's were not official registered and yet they were considered to be valid. This also appeared to be the position in the New Territories. Further, the fact that the properties were not transferred to an independent tong or tso, but remained registered in the name of the father, with trustees appointed, is not fatal to the creation of an ancestral worship trust and the fact that no list of members was prepared is no obstacle to its creation.

55. Mr Tang submitted that an endowment for ancestral worship purpose, like an English trust, should not fail merely for want of registration or other formality, provided that -

(1) the intention to create an ancestral worship trust is sufficiently expressed;

(2) the subject matter of the ancestral worship trust is sufficiently identified; and

(3) the beneficiaries are sufficiently certain (in this case all the male descendants of the Ancestor).

Mr Tang submitted that the Court should strive to uphold the ancestral worship trust in order to give effect to the clear intention of the settlor of the properties.

Ancestral worship trust is unique under Chinese customary law

56. Mr Tang had cited no authorities in support of his proposition. Even assuming that the Ancestor had full testamentary capacity under Hong Kong law, I am not satisfied that an ancestral worship trust could be established on his death by Hong Kong law. The ancestral worship trust is an unique institution created by Chinese law and custom. It involves the actual setting up of a tso or tong. This had not been done during the lifetime of the Ancestor or by his descendants after his death. The failure to establish the ancestral worship trust under Chinese law is not confined simply to the lack of testamentary capacity of the Ancestor. The actual creation requires positive steps to be taken. It would be imprudent and infeasible to marry two unique concepts, namely the English trust concept and the Chinese ancestral worship trust concept simply on the basis that it was the intention of the Ancestor to create such a endowment. The ramification of marrying these two unique concepts is unknown and it is too uncertain for one to attempt such an exercise.

VI. Secret Trust

57. Although the setting up of a secret trust was raised in the Defendants' opening, it was not pursued. Again the concept of secret trust is an English law concept, and in view of my earlier determination, I do not find such a trust was established.

VII. Could the ancestral worship trust be revoked or dissolved by the sons of the Ancestor

Male descendants can revoke ancestral worship trust

58. All the experts agreed that even if the land is subject to an ancestral worship trust, his male descendants could disregard such trust and divide the property amongst themselves. The division must be done with the unanimous consent of all the male members : Tang v. Tang [1970] HKLR 276, Chu v. Chu [1968] HKLR 542 and Kan v. Kan [1987] HKLR 516.

New Territories Ordinance

59. In this case, if the 1946 division was validly carried out by the eight Fongs, it would effectively put an end to the ancestral worship trust even if it was validly created in the first place. Mr Tang, however, argued that the unanimous consent of all the members is not sufficient by itself to enable a Tso or Tong land to be sold or divided because of s.15 of the New Territories Ordinance. Section 15 has its origin as s.13 of the New Territories Land Ordinance, 1905 which was later enacted as s.27 of the New Territories Regulation Ordinance, 1919. Section 13 ("the section") of the 1905 Ordinance is as follows -

"13. Whenever any land is held from the Crown under Lease or other grant, agreement or licence in the name of a clan, family or t'ong, such clan, family or t'ong shall appoint a Manager or Managers to represent it, and may from time to time appoint a new Manager. Every such appointment and change shall be reported at the appropriate office, and the Land Officer on receiving such proof as he may require of such appointment, shall, if he approves thereof, register the name of the said Manager or Managers; the said Manager or Managers thereupon shall after giving such notices as may be prescribed have full power to dispose of or in any way deal with the said land as if he or they were sole owner thereof, subject to the consent of the Land Officer, and shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land. Every instrument relating to land held by a clan, family or t'ong which is executed or signed by the registered Manager or Managers thereof in the presence of the Land Officer and is attested by him, shall be as effectual for all purposes as if it had been executed or signed by all the members of the said clan, family or t'ong. The Land Officer may on good cause shewn cancel the appointment of any Manager and select and register a new Manager in his place. If the members of any clan, family or t'ong holding land shall not within three months after the coming into operation of this Ordinance, or after the requisition of the land if acquired after the coming into operation of this Ordinance, make and prove the appointment of such Manager or Managers as aforesaid, or within three months after any change of Manager prove the same as aforesaid, it shall be lawful for the Crown to re-enter upon the land held by such clan, family or t'ong which shall thereupon become forfeited to the Crown. Such re-entry shall be effected by the registration of a memorandum thereof in the appropriate office."

60. Mr Tang submitted that the 1946 division was invalid because -

(1) the three eldest sons who were appointed as managers by the 1933 Division and the Codicil had not been registered;

(2) no consent to the disposition had been obtained from the Land Office thus the 1946 division was invalid or alternatively that division is conditional upon the registration of the managers or new managers in respect of the DFA land and consent of the Land Office to the division being obtained.

61. In Lai Chi Kok Amusement Park Co. Ltd. (No.2) v. Tsang Tin Sun [1966] HKLR 124, Rigby J. analysed the section as providing for :

"(1) Every t'ong shall appoint a manager to represent it;

(2) Every such appointment shall be reported to the appropriate New Territories Land Office and the Land Officer, if he approves the appointment, shall register the name of the said manager;

(3) Thereafter, the registered manager shall, subject to the consent of the Land Officer, have full power to dispose of or in any way deal with the land, the property of the t'ong, as if he were the sole owner thereof;

(4) Every instrument relating to land held by a t'ong which (a) is executed or signed by the registered manager in the presence of the Land Officer and (b) is attested by the Land Officer, shall be as effectual for all purposes as if it had been executed or signed by all the members of the said t'ong."

62. Mr Tang argued that as a matter of construction the words "any land ... held ... in the name of a clan, family or tong" do not mean that the land must actually be conveyed to or registered in a name ending with the word "clan", "family" or "tong". It is sufficient that the land belonged, under Chinese law to a clan, family or tong : Wu Koon Tai v. Wu Yau Loi [1996] 3 HKC 559. The effect of the section is to take away the rights of the members to dispose of the legal estate in the tso or tong and vest that right in the manager "as if he were the sole owner thereof" subject to the consent of the Land Officer. The authorities for this proposition are :

Lai Chi Kok Amusement Park Co. Ltd. (No.1) [1965] HKLR 413 at 242 -

"It seems to me that, upon the Land Officer registering the appointment, the manager is in the position of a trustee for sale; he has 'full power to dispose of or in any way deal with' land held from the Crown in the name of the t'ong."

Light Ocean Investments Ltd. v. Enway Development Ltd. [1994] 3 HKC 31 At 38E-G, per Litton J.A. -

"Section 15 of the New Territories Ordinance governs the right of sale of t'so land. It is plain from the terms of s.15 that until a manager has been registered as such in the appropriate New Territories land office, the legal estate of t'so land cannot pass to the purchaser."

63. At 37G-I, per Nazareth J.A. -

"I would add that, approaching the matter from the different direction of simple statutory construction, consent is on the plain meaning of s.15 necessary, and cannot be dismissed as surplusage or insignificant, given the object of the legislation as explained by Briggs J. (as he then was) in Lai Chi Kok Amusement Park Co Ltd (No 2) v Tsang Tin-sun [1966] HKLR 124, 130."

At 39A-C, per Litton J.A. -

"What it boils down to in my judgment is thiswhere a manager of t'so land has been duly appointed, but before his appointment as such has been registered in the land office, and before the consent of the Land Officer has been given to the sale, any agreement for sale entered into by the manager can, at best, only be conditional sale. Until he is registered as manager, and consent for the sale has been given, he cannot pass a good title to the purchaser."

The section not applicable

64. I have already ruled that the properties that were divided in 1946 were not subject to any ancestral worship trust and as such, the arguments of Mr Tang could not succeed. In any event, even if the properties were subject to the ancestral worship trust, I do not find that they were caught by the section for the following reasons :

65. First, the wording of the section is clear : it is land held from the Crown in the name of a clan, family or tong. One should not put an unwarranted gloss on these words by including land belonging to a clan, family or tong. The section does not refer to registration of land held in the name of clan, family or tong because it presupposes that such property was already registered in such names. Although Lord Browne-Wilkinson in Wu Koon Tai at p.187 held that "Section 15 deals with the case where lands belong, under Chinese law, to a clan or family; it provides for a manager of such lands to be registered, he having full power of disposition of all the family lands.", he was merely describing the section in an abbreviated manner. He was not concerned with an analysis of the section in the manner as now advanced by Mr Tang.

66. Second, Light Ocean Investments Ltd. was concerned with proof of title in a conveyancing transaction which is different from the question whether the transaction is inherently valid. This is not a case where the managers acted as if they were the sole owners by signing a sale contract without obtaining the approval of the Land Officer. In such a case, the managers would have difficulty in proving title to convey unless prior to completion, the approval was obtained.

67. Third, likewise, Lai Chi Kok (No.1) would not assist the opposing Defendants because it was merely stating the position of a manager whose appointment was registered in the Land Office.

68. Four, the object of the section was described by Briggs J. in Lai Chi Kok Amusement Park (No. 2) as :

"The mischief envisaged by the section is this : land held by a t'ong could in the usual way be conveyed only if the conveyance were executed by all the members of the t'ong. That would as time went on become increasingly difficult, if not practically impossible. The object of the Ordinance of 1905 was to facilitate transactions relating to land. It may well be in the interest of the t'ong that the land should be leased or sold and a convenient means of effecting the conveyance was sought. This was found in the appointment of managers, but at the same time it was necessary to protect members of the t'ong against malpractice on the part of managers. For this the personal supervision of any transaction entered into by the manager was desirable."

Such being the purpose, it would be wrong to invalidate the division of family property when it was made with the consent of all the beneficiaries unless the Land Officer's consent is also obtained. This will defeat the purpose of the section.

69. Five, the section does not say that divisions of family property made with the consent of all members are invalidated unless the Land Officer's consent has been obtained. On the contrary, it provides that a disposition entered into by a registered manager with the consent of the Land Officer and in accordance with the requirements of the section has the same effect as if it had been entered into with the consent of all the members or beneficiaries. This presupposes the validity of the disposition by the members themselves.

70. Section 13 of the New Territories Ordinance (s.11 of the 1905 Ordinance) requires the Court to recognise and enforce any Chinese custom in relation to New Territories land. It is not necessary for me to decide whether the application of Chinese law and customs is qualified by the provisions of the section since I have already found that the section does not apply in the present case.

Other arguments

71. There is a further argument by Mr Tang that the section only applies to ancestral worship land and not to common property. Mr Tang cited no authorities for this proposition but the expert evidence is clear that an ancestral worship land remains to be common property. If the section is to be applied at all then it should apply to all common properties as well. If that be the case, one could see immediately the problems, which Mr Chang S.C., Counsel for the Plaintiff, described as wrecking havoc in the New Territories, because practically every property held by a Fong is common property before its ultimate division.

72. There is also arguments on the implications of estate duties payable in respect of an ancestral worship trust. I do not intend to go into these arguments. In my view whether the section applies or not should not be decided by reference to the implication of estate duties.

VIII. Challenge to the validity of the DFA

Property of Lau Pang Shi and valuation

73. Professor Chang said that the Confirmation Deed and the DFA were invalid for a number of reasons, two of them can be disposed of immediately. First he said that the 1946 division included property belonging to Lau Pang Shi and hence it could not be divided without her consent. The parties agreed that although the property was registered in the name of Lau Pang Shi, they belonged to the Ancestor, hence the parties were entitled to divide this property as well. Second, in the Confirmation Deed it was said that the exact sizes of many of the parcels of land were still "to be determined by further measurement by the Government" (再需政府丈量). Professor Chang said that this indicated that the division was not definitive and if the evaluation proved to be unequal in value, those who made the division would be in violation of the Tsing Statute punishing family seniors who divided family property unequally. Such a division, as a result of a criminal act, is null and void.

74. The term "subject to further measurement by the Government" is a common term used in conveyancing documents in the New Territories, all that it means is that the boundaries would have to be determined by survey. As can be seen from the valuation of the properties at the Confirmation Deed, the value of the properties allotted to each of the eight Fongs was more or less the same -

1. Lau Yu Hi (1st Fong)	$6,580
2. Lau Leung Sheung (2nd Fong)	$6,505
3. Lau Leung Chau (3rd Fong)	$6,682
4. Lau Leung Chun (4th Fong)	$6510
5. Lau Leung Kwai (5th Fong)	$6,540
6. Lau Yue Chiu (6th Fong)	$6,570
7. Lau Leung Kui (7th Fong)	$6,515
8. Lau Leung Wa (8th Fong)	$6,600

75. Apart from Lau Leung Sheung who was able to choose the properties because he was the eldest son at that time, the rest of the properties was drawn by lots. Lau Leung Wa, being the youngest, of course was presented with the final lot of properties but the value of his properties was in fact the second highest amongst the eight Fongs. In terms of substantive law on the equality of division, I do not see any conflict with this principle. There was certainly no argument from the opposing Defendants that the valuation was unfair.

Formal validity : Chinese law

76. Professor Chang's attack on the DFA was in respect of its defects in form and formality. He said that under the Tsing Code, division of family property without parental approval was a criminal offence. If Lau Pang Shi, being the surviving widow of the Ancestor and the mother and step-mother of his children, did not give her formal and explicit approval, then the estates could not be divided. The children who attempted to make the division would be criminally punished and their efforts would be in vein. Furthermore, under Chinese law and custom, a decision to divide family property must be reached unanimously among the Fongs and the instrument for the division must be signed by the clan, meaning the head of each Fong and some senior member of the family if available. If the head of a Fong is a minor or is absent at the signing ceremony, the document must be signed by his lawful representative. In the former case, his guardian, in the latter, a person properly so authorised by him in writing.

77. Professor Chang said that because of the principles of family unity and equality, division of family property was never meant to be easy. It was made by law and custom a "formal act" for which strict compliance with rules concerning form and formality was mandatory. The only legal interpretation for the absence of a required signature was that there was no unanimous agreement for division and consequently no division, with the result that the property is to remain undivided in the family. Professor Chang further stated that in theory these defects could be corrected if those who must sign, added their signatures or indicated in writing their acceptance of the documents at an appropriate time - in the case of the minors, after coming of age. The documents would become valid from the date when the necessary corrections were made, but there was no evidence of such correction.

78. By these rules, Mr Tang argued that the DFA was defective (the invalidity of the Deed of Confirmation was not pursued) because first, Lau Pang Shi, the widow of the Ancestor, had not expressly signified her approval to the DFA by signing in her own capacity and second, the DFA was not duly signed by or on behalf of the 1st or 5th Fongs. Lau Leung Sheung (the 2nd son) and Lau Leung Chun (the 4th son) signed for the 1st and the 5th Fongs respectively because Lau Yu Hi (the head of the 1st Fong) and Lau Leung Kwai (5th son) who were adults but at the time were abroad. There was no evidence that Lau Leung Sheung and Lau Leung Chun were authorised to sign on their behalf.

No statutory requirement

79. It is necessary to examine the basis for saying that the absence of the signature of the widow would render the document invalid. The relevant Tsing Code ("大清律例") only provided that -

" During the lifetime of grandparents or parents, the sons or grandsons are not allowed to set up separate establishments and register them as such, nor to divide the family property, under a penalty of one hundred blows, but the parents or grandparents must be the complainants. Also during the legal period of mourning for father or mother no division may take place, under a penalty of eighty blows; but in this case the nearest senior relations must be the complainants; and if the division has taken place in accordance with the last will of the father or mother, no action will lie." (See Jamieson, Chinese Family and Commercial Law, (page 16))

80. Professor Chang agreed that there was no provision in the Tsing Code which would require the surviving parent to sign on the deed of division before the deed can be treated as valid. Although he insisted that approval must be given and the approval was normally given in the form of a signature to the deed, the requirement was in custom only.

Formal requirement : matter of evidence only

81. Professor Chang said that litigation in traditional China consisted of two types. The more serious ones were those arising out of homicide and robbery. The lesser ones were those concerning family dispute over land and dispute over money. The second type was called trivial matters and would only be decided by magistrates. No appeal was allowed to the prefecture. The present dispute on the division of the properties falls within the second type of litigation. If the matter was brought before a Tsing magistrate, then, according to Professor Chang, if the widow was still alive, the magistrate would ascertain whether she had given her consent to the division. If the widow was dead, then he would rely on the lack of formality due to the absence of the signature of the widow and reject the Plaintiff's claim that the properties had been properly divided.

Widow's approval

82. I do not find it helpful to refer to the evidence of Professor Chang as to what a magistrate in Imperial Tsing dynasty might or might not do. There might well be conscientious magistrates who would not decide a case simply on the basis of the absence of signature of the widow, particularly, as agreed by Professor Chang, if during the lifetime of the widow, evidence could be adduced as to whether the widow had in fact given the approval or not. This effectively demolishes the argument of Professor Chang that the DFA was invalid because of defects in form. Ultimately whether a widow had given her approval to the division is a question of evidence.

83. In the present case, the widow had signed on behalf of the 8th son who was a minor at that time. Professor Chang said that there should be a separate entry in the DFA indicating the widow's approval of the division. The DFA was prepared by a firm of solicitors in Hong Kong in 1946. If the widow in fact objected to the family division, she could simply refuse to sign on the document. The signature of the widow on behalf of her son must be the best evidence that she had approved of the division as a whole. Her approval was not in any way lessen by the argument that she might only be approving the division in favour of her son only and not of the whole division. In terms of valuation, each of the eight sons received more or less the same. In fact the 8th son had the second highest value of the properties divided. Of the 9th share, it was to be used as common property. There simply was no evidence pointing to any objectionable nature of the division. Lau Pang Shi did not raise any objection during her lifetime. The 8th son was the only son of Lau Pang Shi, he gave evidence in these proceedings and he did not suggest in any way that the 1946 division was not consented to by Lau Pang Shi. The 8th son took part in the actual division while Lau Pang Shi represented him, with his knowledge, in executing the DFA. Further, Dr Palmer who had examined many of the documents in the Land Office stated that he had only come across documents of a widow signing as guardian and not signing again in her own capacity. I reject Professor Chang's contention that the division was invalid because the widow had not signified her consent.

Signature for minors

84. Professor Dicks and Professor Baker were both of the view that there was no rule of Chinese statute law or customary law which would require the authority of an agent to be expressly conferred in writing. The signature of the DFA by the mothers of the two sons of the Ancestor was perfectly valid under Chinese customary law and was a practice of very common occurrence in traditional Chinese legal documents of all kinds used in the New Territories. Professor Dicks further stated that far from requiring express ratification by the minors when they come of age, in his experience, such signatures were treated as valid unless expressly repudiated by the minor on attaining majority. I accept the views of Professor Dicks and Professor Baker.

Signature for 1st Fong

85. Lau Leung Sheung, the father of Lau Yu Hi, signed the DFA on his behalf. Lau Yu Hi was adopted by the 1st Fong in order to continue the male line. Surely the father in traditional China must have the authority to sign on behalf of his son if he was not available to sign the deed personally. The 1st and 2nd Fongs are not challenging the validity of the division.

Signature for 5th Fong

86. In respect of the signature of the 5th Fong, it was signed by the 4th son on behalf of the 5th son. These two sons were born from the same mother. The 5th son was living in the United States of America. He emigrated there under the assumed name of another person. Although Professor Chang said that an elder brother had no authority to represent the younger brother, I accept the evidence of Professor Baker that the elder brother had inherent authority to represent the younger brother after the death of the father. This was part of the "五倫" five relationship. In addition, the 4th son had authority as conferred in the will and Codicil of the Ancestor.

Authorisation and ratification by the 5th son

87. The 4th son had been collecting rental of the 5th son's property after the division and remitted the money to the 5th son. There were correspondence between the two brothers in which the 4th son kept the 5th son informed of family matters. In a letter dated 22nd June 1954, the 4th son asked the 5th son to provide him with an authorisation because the previous authorisation was wrongly written. The context in which the authorisation was needed was because there were disputes with the 1st and 2nd Fongs who had trespassed on the 5th son's property and the matter might need to be litigated. The letter further stated that :

"I hope if you could make it within one or two years' time return to Hong Kong. Not only personal procedure, the various tenancy matter I act for you, and the deed of distribution, may not be recognised as officially completed in the lack of your signature. Accordingly no one has the right to deal with his own property."

88. The opposing Defendants said that this is the clearest indication that the division was not valid. Further, in the Power of Attorney dated 18th August 1965 from the 5th son to the 4th son, the authorisation was in respect of future steps to be undertaken by the 4th son, and there was no ratification of the 4th son's signature on behalf of the 5th son.

89. It is clear from the Power of Attorney that there was no confirmation of the authority of the 4th son to sign on behalf of the 5th son. However, it is also clear that the 5th son had never challenged the validity of the division. Until Mr Albert Yee, the only son of the 5th son came into this litigation, there was no indication that the 5th son disapproved of the division of the family property at all.

90. I have already indicated the context in which the letter of 22nd June 1954 was written by the 4th son. It did not show that the parties regard the 1946 division as invalid because of the lack of signature of the 5th son but rather they regarded the 2nd son as using that merely as an excuse in appropriating property of the other Fongs. This is confirmed by two letters written by the 8th son to the 5th son. By a letter dated 18th May 1948, the 8th son informed the 5th son that the letter of authorisation sent by the 5th son was not good enough and he said that "Elder brother Sheung knew the loophole and held all the money. All other brothers could not do much about it in law." In a letter dated 23rd October 1950, the 8th son again asked the 5th son to send an authorisation authorising someone to manage his property in Yuen Long. The context in which this authorisation was needed was again because of the misdeeds of the 2nd son. He said that -

" Now your house has been occupied by them for their use. His own house has been rented to others. Now the rental value in Yuen Long is rather expensive. The present rental value of your house is about Four Hundred Hong Kong dollars per month. Because the divisions of properties have not been precisely dealt with, it would not be convenient for us to act on your behalf. Now (the house) is till trespassed and occupied by him.

Do you have no way of solving it? I told you once more, on the following procedures :"

The procedure he suggested was the giving of the letter of authorisation.

91. Further it is clear that the 5th Fong had taken exclusive possession and enjoyment of the profits and rent of the land distributed, the rent were collected first by the 4th Fong and later by Dr Lau. This is apparent from the correspondence between the parties. There was a letter dated 20th October 1971 from the 4th son to the 5th son accounting to him five years' rent of the fishponds distributed to the 5th son by the 1946 division. In a letter dated 10th January 1982 from the 5th son to the wife of the 4th son, the 5th son asked for the rental for 1981 of the fishponds distributed by the 1946 division and also asked her to turn over management of the fishponds to Dr Lau on behalf of the 5th son from 1982. This was responded by a letter dated 5th May 1983 from the Plaintiff to the wife of the 5th son accounting the rental deposit and the rent for the first half year of 1981 for the fishponds distributed in 1946. The 5th son must have by conduct approved of the division and accepted the property that was allotted to his Fong.

92. I hold, therefore, that the DFA was not invalid due to any defect in forms.

5-Year Limitation

93. Further the Tsing Code provided that : -

"No action shall be brought in respect to the division of family property after a lapse of 5 years or upwards from the date of such division, nor earlier if the several members of the family have signed a deed of partition" (Jamieson, p.86)."

"條例

一. 告爭家財田產﹐但係五年之上﹐並雖未及五年﹐驗有親族寫立分書已定﹐出賣文約是實者﹐斷令照舊管業﹐不許重分﹐再贖。告詞立案不行。"

94. Professor Baker was of the opinion that the time limitation had been exhausted before there were signs of dispute among the Lau families.

95. Professor Chang, on the other hand, stated that the provision was not applicable in the present case because there had not been a valid and fully implemented division of property. He said that in traditional Chinese law and custom, adverse possession, regardless of its duration, was not a basis for barring the owner from claiming title and all the rights affiliated with it. The 5-year limitation period was not to justify adverse possession but for a party to challenge a fully implemented but unfair division. This challenge was not allowed where there was a properly executed document because the fairness of the division was presumed. He said that he had not come across case records in which this rule was applied. On the contrary, he had seen cases of litigation dragged on for generations.

96. The provision, in my view, should be construed as follows : if there was a deed of division, then no action could be brought on the division at all. If there was no deed of division, the challenge must be lodged within five years of the division. I have already ruled that the 1946 DFA was valid and was not affected by any defects in formal requirements. There was no suggestion of unfairness in the division. The five year limitation to challenge the validity of the 1946 division had long lapsed.

Alienation by theft and stealth

97. There was a provision in the Tsing Code dealing with the alienation of land set aside for ancestral worship -

" 6.- If lands which have been set apart for maintaining ancestral sacrifices are alienated by the descendants of the family interested to the extent of 50 mow or upwards, they shall be punishable as for selling a family burying ground, viz., with banishment for military servitude to a distant frontier. If the lands are less than 50 mow in extent or if lands dedicated to charitable uses (義田)are sold, the punishment shall be the same as for fraudulently selling Government land. The sale of buildings long used as ancestral temples is also forbidden under a penalty not exceeding 3 years' banishment. In each case the purchaser, if cognizant of the illegal nature of the transaction, shall be equally punishable. The land or buildings shall be returned to the custody of the elder of the clan and the purchase money shall be forfeited to Government. Provided, however, that in each case there must be distinct evidence, either of a public or private nature, to establish the fact of the land having been duly dedicated for ancestral or charitable uses as the case may be, such as an inscription on a stone tablet, a formal report to the authorities or a public document drawn up by the whole of the kindred. Any complaint laid without such proof in order to raise strife shall be punishable as a malicious accusation." (Jamieson page 84)

This is a provision dealing with alienation by stealth and theft. It has no application to the division by agreement between the descendants of the Ancestor.

Validity of the DFA - Hong Kong law

Problem with signature

98. It was argued by the opposing Defendants that if the validity of the DFA was governed by Hong Kong law, it is invalid because it was not duly signed by or on behalf of the 1st, 5th, 6th and 8th sons. At common law, a deed can only be signed by an agent authorised by deed : Halsbury's Laws of England, 4th Edn., Vol 12, para.1310. There is no evidence that Yu Hi had authorised his father, or the 5th son authorised the 4th son, by deed or otherwise, to execute the DFA on their behalf. The Power of Attorney given by the 5th son dated 18th August 1965 did not purport to ratify the signature of the 4th son in the DFA and had no retrospective effect. Further, Dr Lau and the 8th son were minors at the time of the DFA, they had no capacity to enter into any deed and their respective mothers had no general authority at common law to enter into a deed of family arrangement on their behalf. The DFA is therefore not binding on Yu Hi, the 5th son, Dr Lau and the 8th son or their respective Fongs.

Approval of division

99. Many of these arguments were already raised. The answer is that Yu Hi, the 5th son, Dr Lau and the 8th son or their respective Fongs, had substantially performed the DFA by taking exclusive possession and enjoyment of their allocated properties and by no disavowing the DFA. In particular, if Dr Lau (then aged 15) and the 8th son (then aged 18) were minors according to Hong Kong law, they must have taken to have ratified the DFA upon their reaching majority by reason of the matters I have referred to earlier. They have further not disavowed the Chinese Deed of Confirmation which they signed personally earlier. Further, the 8th son co-operated with the 4th son to request the 5th son to provide the authorisation in order to counter the 2nd son's attempt to make use of such lack of proof as an excuse or loophole. It is simply too late to raise these technicalities.

Other arguments

100. It is further argued that if the DFA cannot take effect as a deed, it cannot take effect as a simple contract either. This is because under s.3 of the Conveyancing and Property Ordinance, Cap.219 (the equivalent of s.5 of the former Law Amendment and Reform Consolidation Ordinance), a contract for the sale or other disposition of land must be made or evidenced in writing signed by the party to be charged or by some other person lawfully authorised by him for that purpose. This argument is again misconceived because s.3 which requires contract for the disposition of land to be in writing, does not further require that the authorisation must be in writing as well.

101. It is further argued that one party to a contract cannot sign as an agent for the other. Reliance was made on Megarry & Wade, the Law of Real Property, 5th Edn., p.586, Sharman v. Brandt (1871) LR 6 QB 720 and Bird v. Boulter [1833] 4 B & AD 433. These authorities dealt with a two-party contract situation. No authority was cited that in a contract with more than two parties, e.g. A and B contracting with C, A cannot sign for himself and B.

IX. Carrying the division into effect

Defendants' complaint

102. The opposing Defendants complained that even if it is found that the DFA was valid at its inception, the parties failed to carry out for well over 50 years the following essential terms :

(1) Conveying the land to the respective Fongs (Clause 2);

(2) Using the balance of the sale proceeds of the Property in "Tai Ping Nam Loo" ($30,000) to meet all immediate payments and other outgoings in respect of the estate of the father and costs of conveyance (Clause 3);

(3) Distributing the surplus to the eight Fongs (Clause 3).

Conveyancing of properties

103. The DFA stated that as soon as the District Land Office of Tai Po, New Territories opened for registration and circumstances permit, the trustees and all necessary parties shall execute such documents for the purpose of conveying to the eight Fongs their respective shares in the properties.

104. It is true that there was no conveyancing of the properties to the eight Fongs. After the 1946 division, the 2nd son went to Toi Shan to carry on the business there, the 3rd son also went back to Toi Shan. The 4th son went back to Guangzhou for business until the Communist took power in 1949. The 4th son then came back to Hong Kong followed later by the 2nd son. When the 4th son went to the Taipo Land Office to effect the official transfer, he attempted to sign for the 5th son but was refused by the Land Officer because there was no authorisation from the 5th Fong. There were correspondence between the 4th son and the 5th son in relation to the letter of authorisation, but again the Land Office did not accept the authorisation. Eventually, the matter could not be completed. These were the reasons given by Dr Lau for not conveying the divided properties to the eight Fongs. It must also be borne in mind that the three trustees had all died. The 4th son, the last trustee, died in 1981. There were also subsequent death of the title holders of the properties. The problem of lack of funds to pay the death estates also aggravated the situation. Even Dr Lau recognised the blame for the absence of conveyance should not be laid at anyone's door.

Possession

105. However, what is more important is that the eight Fongs had taken possession of their properties from the spring of 1947. The 1946 division had clearly and finally completed the division of the properties of the Ancestor and his family into eight fongs (分家) which was already divided in 1932.

106. For the past 50 years the eight Fongs have taken possession of the divided properties including those in China. They are still in such possession (either physical possession or by letting and collection of rents) except those resumed by the Government. They also granted tenancies of the properties allocated to them under the DFA and have been collecting rent therefrom without consulting nor accounting to the other of the eight Fongs. The 3rd and 7th Fongs which were given business premises in China had such premises returned to them by the authority after their earlier confiscation. These premises were let out and they continued to collect rent.

107. The eight Fongs have taken turn by rotation each year to manage the properties in the 9th Part of the Schedule of DFA.

Not a temporary measure

108. Professor Chang said that a possible explanation was that each Fong took possession of more or less the portion of the properties assigned to it by the DFA as a temporary measure pending a valid definitive division so that in the meantime the family property would not be left unmanaged and its proceeds uncollected. In other words, each Fong took possession of a portion only as the manager, not as the owner. This kind of temporary arrangement was not uncommon in traditional Chinese society.

109. It is a question of fact whether the eight Fongs took possession of the properties that were divided among themselves as owners or simply as managers of the undivided family property. From the evidence, it is clear that the eight sons, apart from taking possession of the properties allotted to them, had actually took other benefits recorded in the DFA. The DFA referred to the sale of two properties in Guangdong in China. The proceeds of sale was $150,000, apart from $30,000, the amount was divided equally between the eight Fongs of $15,000 each. The receipt of this $15,000 was confirmed by the 8th son in a letter dated 18th May 1948 (Exh.D9). In a letter dated 29th April 1966 from the 7th son to the 4th son, it was alleged that payment of passage fees had to be paid to the 8th son in respect of the boundary between the 7th and the 8th sons. The 8th son agreed that he had collected management fee from the tenant of the land of the 7th son. This was because the tenant had to pass through his (i.e. the 8th son's) land. All the eight Fongs collected rent from the portion allocated to them in 1946 without accounting it to any other Fong. The position is to be contrasted with the 9th share reserved for ancestral worship, the eight Fongs had to share the rent with others by taking turns to collect rental from the tenants, this is clearly pursuant to the terms of the DFA. I am unable to accept Professor Chang's explanation that the eight Fongs were merely managing the properties pending a definitive division. The properties and the family were already divided once and for all by 1946.

Distribution of money

110. In regard to the sum of $30,000, the 8th son said that the money was held by the 2nd and 4th sons in equal shares and was never distributed to the eight Fongs. Even if the $30,000 was retained by these two sons and had not been distributed, they would, in any event, not be sufficient to meet the estate duty of the Ancestor. Furthermore, the fact that the legal title had not been conveyed and the sum had not been used as provided in the DFA pales in comparison with the fact that the most substantial and important term of the DFA had been carried out into effect for over 50 years, namely the distribution of the land in Hong Kong and land and business in China and the parties taking exclusive possession, enjoyment and control of them.

Ancestral houses

111. The opposing Defendants further referred to the four ancestral houses which formed part of the common property referred to in the 9th part of the DFA. Each of the Fongs had taken exclusive possession of half of a house. Notwithstanding their nature as common property, the 2nd, 5th and 6th Fongs had let out their respective houses to tenants and collected rents without having to consult or render any account to the other Fongs. Hence, it was argued that the collection of rent of the other properties does not support a valid division.

112. The argument was misconceived. The houses were completed by 1935. They had been the residence of the eight Fongs even before the final division in 1946. It is clear that the parties had regarded the houses on a different footing in that they should not be divided and be sold to outsiders although they had been exclusively possessed and occupied by the individual Fongs. This is made abundantly clear by the Draft Division, Clause 6 of which stated that the houses could not be sold but the Fongs could rebuild the houses. Clause 15 further stated that the house occupied by the 5th Fong (and the 1st Fong) had not been divided clearly in the previous "分家" (probably the 1933 division), and funds from the common fund should pay for the building of a partition wall to separate the two households. The arrangement relating to the houses does not mean the taking of exclusive possession of the other properties is not referable to the 1946 division.

DFA not lapsed

113. In my view, the eight Fongs had by conduct clearly showed that they accepted the division of the property made in 1946. I certainly do not agree that one can infer from the failure of the parties to carry out the essential terms of the DFA as an indication that the parties have treated the DFA as having been lapsed. Nor could I find that the discussions between the eight Fongs regarding the sale of the DFA land after 1975 as consistent only with the belief that the DFA was ineffective or had lapsed.

Legal estate

114. It is a well established principle that where "the plaintiff has been let into possession under the contract and has obtained the equitable interest, so that all he requires is a mere conveyance of the legal estate, even many years' delay in enforcing his claim will not prejudice him" : Snell's Equity, 29th Edn. at p.610.

115. Wu Koon Tai and Another v. Wu Yau Loi [1997] A.C. 179 showed that the fact that the legal title remain outstanding did not affect the ability of the beneficial owner to deal with the land. At page 188, Lord Brown-Wilkinson stated that : -

"In principle, there is no reason why a devisee of land comprised in an unadministered estate cannot enter into a binding contract to sell that land. True, until completion of the administration and the vesting of the property in the devisee, the devisee cannot convey the land in specie. But their Lordships were referred to no authority to suggest that such devisee cannot validly contract to sell the land at a time when his interest is a mere chose in action or expectancy. Their Lordships can see no distinction in principle between such a contract and a contract for value to assign a future chose in action. As and from the date when the chose in action comes into existence, the contract becomes specifically enforceable."

X. Enforcing the DFA

Defendants' submissions

116. The Defendants further submitted that it is now too late and inequitable for the Plaintiff to seek to enforce the DFA because :

(1) There has been a lapse of over 50 years for the performance of the DFA, in particular Clause 2.

(2) There have been a lot of uncertainties regarding the validity of the DFA in the past.

(3) There has been a material change in the circumstances : large portions of the DFA lands have been resumed by the Government, making it no longer possible to physically distribute the lands in accordance with the terms of the DFA.

(4) The amount of estate duty required to be paid in order to enable the lands to be distributed to the eight Fongs in accordance with the terms of the DFA is now much higher than in 1946, having regard to the lapse of time and the intervening deaths of members of the Lau family.

(5) The "apparent" agreement of the 4th Fong to have a joint sale of the DFA lands and equal division of the net proceeds makes it inequitable that the Plaintiff should now be allowed to revert to the position under the DFA; it would be even more inequitable to allow the DFA to be enforced at the instance of the 4th Fong having regard to the fact that in or about 1978 when the 7th Fong was in desperate need of money and wished to dispose of the lands allocated to them under the DFA, Lau Yu Shing was told by the 4th son that he could not sell the lands allocated to their Fong under the DFA separately because all the lands were tied up and that in any event there was going to be a joint sale.

Equity in enforcing the 1946 DFA

117. The parties have taken exclusive possession and enjoyment of the land and have made improvements for over 50 years. In my view, the equity must lie in maintaining this status quo rather than unravelling the division that was already performed for 50 years.

118. In relation to the uncertainty about the validity of the DFA, the Defendants relied on the correspondence between the sons and the lack of authorisation from the 5th son as an indication that the 1946 division was invalid. I had already dealt with the correspondence earlier and the context in which the authorisation was sought. The opposing Defendants further referred to the two Deeds of Appointment of Additional Trustees dated 13th August 1981 and 22nd November 1982 in which no mention was made of the DFA. I just cannot see how the absence of reference to the DFA is an indication that the parties recognise that the DFA was invalid or had lapsed. In any event, as suggested by the Plaintiff, if the Defendants had been seriously questioning the validity of the DFA, they could have sought proper legal advice on the matter.

119. As the properties had been properly distributed physically in 1946 and possession had been taken, the resumption by the Government of land which falls within the boundary of the individual Fongs had no effect at all on the outcome of this case. The respective Fongs had taken the beneficial ownership of the property allocated to it and the legal title should follow. Any compensation payable would be paid to the Fongs whose land was affected by the resumption.

120. As regards estate duty, this has always been a problem and it is not a reason why the DFA should not be enforced.

121. The 3rd Fong, through Lau Yue Kok, had, after the trial began, put in an affirmation dated 11th October 1997, offering for the first time the Chinese property allocated to his Fong for redistribution. However, the 7th Fong did not suggest that its property in China could also be redistributed. Nonetheless, Lau Yu Shing of the 7th Fong now claimed that the 1946 division should be unravelled because of an alleged representation by the 4th son that Lau Yu Shing could not sell the land allocated to his Fong. At that time the 7th Fong was in financial difficulties and it wished to sell the land allocated to it. What Lau Yu Shing said regarding this conversation he had with the 4th son was only given in his oral evidence. It was not mentioned in any of his affirmations. Further, it was not mentioned in any of the affirmations of the other Defendants. In the Reply filed by the 3rd, 5th, 6th and 7th Defendants, it was merely pleaded that the 4th son had promised to pull his land together with those of the other Fongs for joint sale and to divide the proceeds equally. There was no allegation that the 4th son had said that the lands were intact as common property and that it was impossible for an individual Fong to sell the land. I do not accept that the 4th son had made the representation. In any event, Lau Yu Shing had probably misunderstood what the 4th son said because at that time there was negotiation for the sale of the properties.

122. All in all there is no relevant "equity" against recognition of the legal validity of the 1946 division. I agree with Mr Chang's submission that this is quite unlike the ordinary case of someone seeking specific performance of an executory contract. In such a case, there may be equitable considerations against specific performance and the court may award damages instead. Here the division has already taken place among those who consented to the arrangement. A declaration that the 1946 division is valid in law simply means that the registered owners are holding the respective portions for the land in trust for the respective Fongs in accordance with the DFA. The history of the family should not be rewritten after 50 years when all that the opposing Defendants can show are merely doubts and not some fundamental flaws regarding the 1946 division.

XI. The one-eighth agreement

The pleaded case

123. The pleaded case of the opposing Defendants is that the DFA was subsequently varied by an agreement ("the one-eighth agreement") which was reached in or about 1979 as a result of a series of family meetings attended by representatives of all eight Fongs. By the one-eighth agreement all eight Fongs agreed to have the divided property grouped together for sale or for permission for redevelopment and that all proceeds of sale, after deducting all expenses, would be divided into eight equal shares and the head of each Fong or his authorised person shall personally receive the proceeds.

Facts

124. According to Dr Lau, in 1975, Lau Yu Hi of the 1st Fong had contacts with property agents and developers who were interested in acquiring the land under the DFA. Lau Yu Hi put these suggestions to the 4th son who then called for family meetings. Before the first meeting was held in 1976, Lau Yu Hi told Dr Lau that the 4th son agreed that in the event of sale, the proceeds would be divided equally. He said that the 4th son's position was made known to the representatives attending the meeting before the meeting began. Another proposal at that time was that the family would jointly develop the land with an interested party. But the family members were not interested in the proposal and they preferred an outright sale. Dr Lau said that right from the beginning of the meetings, it was agreed that there should be a joint sale of the Ancestor's land, the net proceeds of such sale would be divided equally among all the eight Fongs. What required further discussion was basically the price of such sale and the logistic of sale.

125. According to Lau Yue Kok (3rd Fong), it was the 4th son who suggested joint sale and equal division of the proceeds. He said that the 4th son asked the Fongs to set aside their differences in that the area of land of some of the Fongs was larger, some closer to the road and some land of the Fong had not been rented out. The 4th son was the most senior member of the family in Hong Kong at that time.

126. Lau Yue Sum (8th Fong) also stated that the 4th son had said at the beginning of the meetings that there would be a joint sale and equal distribution of proceeds.

Minutes of meetings

127. The agreement was recorded in a minute written in a minute book. This minute together with others in the minute book were signed by those attending the meetings including the 4th son and Lau Yu Hi. The minute book was torn into pieces by the 4th son and burnt by his son, the Plaintiff in a meeting in 1980.

Tearing up of the minute book

128. The events leading to the tearing up of the minute book was dealt with by the Plaintiff. He is now aged 58. He came to Hong Kong from China in 1950. Between 1950-1959 he lived with his father in Tung Shing Lei, Yuen Long. Ever since he was a young boy he was aware that there was "分家" (division of the family). He was told by his father that there was division of the family property and he was aware that certain property belonged to their family. From 1959 onwards he had been living overseas, first in Australia and later in Canada. He visited his family in Tung Shing Lei from time to time.

129. In a visit in October 1980 his father complained to him that in respect of the family meetings he was not sure whether he had signed paper which could be interpreted as he having agreed to the one-eighth agreement. He felt uncomfortable because no copy of the minute was supplied to him. He was not sure if he was tricked into signing something. The Plaintiff suggested to him that if he was so concerned, then he should ask for the original and tear it up. His father then called up Lau Yue Kok to bring over the minute book with the pretext that the 5th son, who was also visiting Hong Kong at that time, would like to examine the book. Lau Yue Kok brought along the photocopy of the minute book. The father was unhappy and insisted to see the original.

130. A few days later, a family meeting was held in a restaurant. On the way to the meeting, the Plaintiff and his father saw Lau Yu Hi who then gave the original minute book to the father. When the Plaintiff and his father reached Yuen Long, the father went into a book shop to make a photocopy of the minute book. The father said he wanted to tear up the book but wished to keep a record.

131. At the meeting, the father took out the book, tear it into pieces and told the Plaintiff to burn it. He did as he was told. The gathering became quiet and there was an exchange between Lau Yue Kok and the father. The atmosphere was very tense, then either Lau Yue Kok or Lau Yu Hi said "Now that the minute book is destroyed, we are now in harmony". The dinner then broke up and the family members went their separate ways.

132. When the Plaintiff went home, he gave the photocopy of the minute book to his father. The photocopy of the minutes were put into an envelope and his father wrote on it in Chinese the following words :

"燒燬冗意思會議錄後的遺痕".

He did not know what the father did with the photocopy and after his death, his nephew Lau Kin Shun (Freeman Lau) found the photocopy in the envelope. These were produced (Exh.P-5). The terms of the minute stated that -

"All eight families agree to have the divided property to group together for sale or apply for development. All proceed of sale, after deducting all expenses and fees, will be divided into eight equal parts and the head or his authorized person shall personally receive his entitlement in the money.

Proposal :-

1. To sell (all lands) for a price of $130,000,000.00 to $150,000,000.00 (as the lowest price).

2. Apply for development planning (for reference).

3. Tentatively appoint Mr Wong Wai But to handle all necessary matter.

4. Appoint three persons as head persons to deal with the matter : Lau Yu Hi, Lau Yue Chiu, Lau Yue Kok.

5. All important matters shall be voted by eight families and if agreed, shall be resolved.

6. Commission paid to middle man is 1.5/100 after sale.

7. To retain two pieces of graveyard land."

The minute was not signed by anyone.

Reconstruction of the minutes

133. Lau Yue-kok kept minutes of meetings. The minute book was described by him as the big book and contained the minute of the one-eighth agreement. The minute book was not always brought by him to the meetings. Sometimes he would write the minutes on paper or in some notebooks which he would later copy into the minute book and they would be signed by all those attending the meetings. He was able to locate some draft minutes of meetings including that of the 1979 meeting and minutes in two notebooks which were signed by those attending the meetings. He said all these minutes were eventually copied to the minute book and signed by all the attendants of the meetings.

(1) The one dated 6th January 1976 was a draft minute which was not signed by the persons attending the meeting. This is in the form of an original handwritten document. (D12)

(2) The next was the minute of the meeting of 6th October 1976. It was signed by those attending, this minute was recorded in an exercise book. (D13)

(3) The next minute was one dated 28th December 1976, it was signed by those attending the meeting, this minute was also recorded in the same exercise book.

(4) A photocopy of a draft minute of a meeting held in 1979. (D14) This minute recorded the one-eighth agreement. The minute was copied into the minute book and signed by the representatives of the various Fongs. The opposing Defendants submitted that the signed minute constituted the memorandum of the one-eighth agreement which can be reconstructed from the unsigned minute.

(5) The next minute was the one dated 18th March 1980 (D15). The photocopy of this minute was produced. It was signed by the attendants to the meeting. Again, Lau Yue-kok said this minute was copied to the big minute book.

(6) Then in respect of a meeting held on 12th July 1985, the minute was written in another notebook. (D11)

134. Lau Yue-kok denied that the 4th son had ever asked for the minute book before the meeting in which he torn up the minute book.

Minutes not signed

135. Having considered the evidence of the witnesses, I accept the evidence of the Plaintiff regarding the events of the tearing up of the minute book. I further do not accept that the minute of the 1979 meeting was signed by the representatives of the eight Fongs. The documents discovered by Freeman Lau after the death of the 4th son (P-5) consisted of photocopy of the unsigned minute of the 1979 meeting and part of the minute of the meeting of 18th March 1980. The second page of the undated minute was on the same page of the minute of the meeting of 18th March 1980. I accept these were photocopies of the minute book copied in the book store. Yet next to the signed minute of the meeting of 18th March 1980 was an unsigned minute of the meeting in 1979 which the opposing Defendants alleged contained the agreement of the parties. There was no explanation how the 4th Fong could have come into possession of P-5 if it was not made from the minute book before it was torn up and burnt. Lau Yue Kok stated he did not give the minute book to the 4th son or the Plaintiff. At the very least, there is a doubt as to whether the minute was signed.

136. I think what is more likely is that the minutes contained in the exercise book were not copied back to the big book. It would be superfluous to do so bearing in mind that they were all signed by those attending the meeting. Even if P-5 was only the photocopy of the minute book given by Lau Yu Hi to the 4th son and not the actual photocopy of the minute book copied in the bookshop, it nevertheless confirmed that the undated 1979 minute was unsigned at the time it was given to the 4th son.

137. I am not satisfied that that 1979 minute was signed.

Lau Yue Kok in his first affidavit of 21st June 1996 said that some of these minutes were signed by those present at the meetings. He did not say that all the minutes were signed. (B255) It was only in his fourth affidavit of 11th April 1997 that he stated that the minutes contained in the book were all signed by those attending the meeting. His explanation for this was that as the events occurred a long time ago, the recollection only came back to him later on. Dr Lau in his affidavit of 11th April 1997, at paragraph 13A stated that he and the others had signed on the engrossed minutes, the terms of which were similar to those of the draft minute of 6th January 1976 and the undated minute of the meeting in 1979. I think the truth of the matter is that as the event happened so many years ago in 1979, the witnesses for the opposing Defendants just could not have a clear recollection whether the 1979 minute was signed or not.

No concluded agreement

138. What is more important is that I do not find that there had been a concluded one-eighth agreement between the eight Fongs as alleged by the opposing Defendants. It is one thing for members of the various Fongs to have meetings at which the idea of a joint sale or redevelopment and sharing of proceeds was discussed or perhaps pursued even to a point where there was some broad consensus of objectives or principles subject to agreements being reached on price and other essential terms, it is quite another to spell out from the meetings a legally binding contract.

139. Mr Albert Yau, Counsel for the 7th Defendant, advanced numerous arguments in support of the one-eighth agreement. I do not propose to deal with them one by one. The opposing Defendants simply cannot overcome the matters I shall now deal with.

Price

140. It is clear from the minutes of meetings, particularly the draft minute of the 1979 meeting that essential terms of the agreements were still in the state of proposals. One of the terms to be agreed between the parties was the price. The opposing Defendants are seeking a decree of specific performance of the one-eighth agreement. One may ask immediately what is the selling price for the properties if specific performance is to be ordered? It is clear from the evidence of Lau Yue Sum that the price was a major consideration which needed to be agreed by the eight Fongs before there can be any sale. Lau Yue Sum said that before the 4th son torn up the minute book in 1979, there was an offer from a potential buyer of $150 million. Between 1982 to 1984, the property market in Hong Kong collapsed. I posed the question with Lau Yue Sum whether there would be a sale if some members insisted at that time to sell at a price lower than the $150 million. He responded in the negative and he confirmed that there must be an agreement on the price before the properties could be sold. He did not say that the price must be the one recorded in 1979 draft minute of $130-$150 million. It would be absurd to do so. Throughout the years there had been offers by developers to the family, one trying to outbid the other. However, the evidence clearly revealed that there was never any concluded agreement in which the families agreed to sell all the properties at an agreed price. Dr Lau also agreed that the price had to be agreed by the families although his idea of agreement changed from his initial position of unanimous agreement to that of a simple majority of five members to three.

141. Now that the Government had resumed substantial portion of the Ancestor's land, this further showed that more discussion and agreement on the price would have to be made before there could be a sale.

142. It is now argued that it was implied in the one-eighth agreement that unless the parties agreed otherwise, the joint sale would take place within a reasonable time after the reaching of the agreement and in default of agreement on price, the price would be the best price obtainable during that reasonable period. If the parties were prepared to wait for higher bids, they would simply by conduct, extending the reasonable time for the sale to take place. If one of the parties cannot wait any more for a higher price, he is entitled to give the others reasonable notice to proceed with the sale.

143. This is not something that the parties had agreed at all. This is really a last minute attempt to overcome an insurmountable hurdle. Lau Yue Shing vaguely referred to this but none of the other witnesses mentioned this as part of the agreement. I do not accept this was in fact discussed at all. This demonstrates, once and for all, the hopelessness of the opposing Defendants' case in trying to establish the one-eighth agreement when the essential term on the price had not been agreed.

Estate Duty

144. Without a doubt, the payment of estate duty would have a tremendous effect on the net proceeds to be actually received by each Fong. In view of the difference in size of the estate of deceased persons who were connected with the Ancestor's properties, the effect is that there may not be actually an one-eighth sharing among the eight Fongs even if the net proceeds were to be divided equally.

145. The minute of 28th December 1976 stated that the estate duty would be paid by the vendor. Dr Lau stated that this was a mistake and it should read as the purchaser who would pay for the estate duty. Dr Lau said the understanding was that the estate duty of the title holders of the Ancestor's properties was to be paid by the purchaser although the purchaser would be persuaded to pay for the estate duty of other deceased beneficiaries. However, this would only be treated as a bonus.

146. In 1979 when the alleged agreement was reached, only the 2nd son, the 3rd son and Lau Pang Shi of the title holders had died. However, more title holders died subsequently : the 4th son died in 1981 and the 7th son died in 1987. On the other hand, in order to convey to the purchaser, the estate duty of all the deceased beneficiaries' interest had to be cleared. More beneficiaries died since 1979 : Lau Yu Hi in 1993 and Lau Leung Kwai in 1994.

147. The opposing Defendants had never pleaded how the payment of estate duty should be dealt with. It is now contended by Mr Yau that all the estate duties of the deceased beneficiaries would have to be paid from the common fund first and not from the share of each respective Fong. This is contrary to the evidence of Dr Lau and this is another instance of an essential term of the agreement not having been agreed by the parties.

Pooling of rent

148. The parties had further disagreements on the pooling of rent. Very briefly, there was discussion that the rent collected by the respective Fongs should be pooled together in order to use them for common expenses pending the sale. The 2nd and the 4th Fongs were against the pooling of rent. Dr Lau agreed that no agreement was reached on the pooling of rent pending sale. He did not mind those against pooling of rent to have their own ways, but Lau Yue Sum (8th Fong) was absolutely against that idea and insisted on pooling the rental and no agreement was therefore reached.

Compensation for improvement

149. In a minute of meeting of the Lau family held on 23rd June 1982 and recorded by Mr Philip Chan, then working in Deacons, it was stated that Lau Yee Pang raised the question of compensation for those who had expended money on improving the land allocated to the families. Although the witnesses for the opposing Defendants stated under cross-examination that Lau Yee Pang did not raise the matter anymore, there was no evidence of any agreement reached on this issue. Lau Yu Shing on cross-examination stated that there was an occasion when Lau Yee Pang told him that he did not want the compensation any further. I think the more likely explanation for this matter not being raised further was that in the 1990's, the parties were still in a state of negotiation and was waiting for a draft agreement so that they could consider the terms in detail in order to see if an agreement can be reached.

Capacity to represent the relevant beneficiaries

150. In the Amended Counterclaim, it was pleaded that the minute of the one-eighth agreement was signed by the representatives of all eight branches of the family. They were :

Lau Yu Hi for the 1st Fong.

Lau Yee Pang for the 2nd Fong.

Lau Yue Kok for the 3rd Fong.

Lau Leung Chun for the 4th Fong and 5th Fong.

Lau Yue Chiu for the 6th Fong.

Lau Yu Shing for the 7th Fong.

Lau Yue Sum for the 8th Fong.

The capacity of these representatives must be governed by the law of Hong Kong. There is no evidence that these representatives purported to act as the intended personal representatives of the relevant estates. There is no evidence that all the beneficiaries of the relevant estates agreed to the alleged one-eighth agreement. The opposing Defendants have simply not shown the capacity of these representatives.

Significance of the tearing up of the minute book

151. The tearing up of the minute books marked a watershed in the relationship between the 4th Fong and the other Fongs. I accept the evidence of the Plaintiff as to why his father torn up the minute book in the meeting of the Fongs. I would not construe the act as a confirmation that the minute of the alleged one-eighth agreement had in fact been signed. Although Dr Lau, Lau Yue-kok and others played down the significance of this event by describing the action of the 4th son as an irrational act : an outburst of temper or showing off his authority, my conclusion of this event is that the 4th son had, by the tearing up of the minute book, showed to the other Fongs that he would put to an end the discussions between the Fongs regarding the sale of the property. Whatever was discussed among the eight Fongs came to an end there and then. There could not be any alternative view to this event. The 4th son being the most senior member of the eight Fongs at that time and who, according to the evidence of Lau Yue-kok and Dr Lau, had initiated the discussions, chose to put an end to the discussion in this dramatic manner.

152. It is significant that there was no further discussion on sale during the life-time of the 4th son. After his death, when the discussion on the joint sale of the property was raised again, it is inconceivable that either the Plaintiff or Freeman Lau would have agreed either expressly or by implication a division of the proceeds of the sale equally between the eight Fongs when the Plaintiff's father and the head of their Fong had, a few years ago, actually put an end to the discussion. The discussions remained to be discussions in which no concluded agreement was reached. There was offer made by the 4th Fong to the other Fongs but this was for the purpose of resolving the dispute and not a concession that the one-eighth agreement existed. It is an exaggeration to say that the attendance of the 4th Fong in the meetings after 1979 amounted to an affirmation of the one-eighth agreement. Regarding the cheque of $10 m collected by Freeman Lau, I accept his evidence that he was merely acting as an instrument for Lau Yee Pang to collect the cheque from a potential purchaser. At that time there were rival bids by interested purchasers and the impression one gets from the evidence is that there were rivalry among the Fongs and one Fong would like to show that it had an offer higher than those put up by the other Fongs. I further accept the evidence of Mr Freeman Lau that he had in the meetings expressly made known to the other Fongs that he was not representing his uncle, i.e. the Plaintiff, and he was merely transmitting matters discussed in the meetings to his uncle. He had never agreed with the other Fongs that there should be a joint sale of all the properties with the proceeds being divided equally between the eight Fongs. Further I just cannot see how the appointment by the 4th son in 1981 of Lau Yue Kok (3rd Fong) and Lau Yee Pang (2nd Fong) as additional trustees could be an act of affirmation of the agreement on the joint sale.

Mr Philip Chan

153. There had been extensive cross-examination of Mr Philip Chan, the solicitor for the Plaintiff. I do not intend to repeat this evidence. I find Mr Chan to be an honest and truthful witness. The steps that had been taken in this case were steps that he had considered to be proper and in accordance with appropriate practice. I do not find there had been a deliberate concealment of the 1995 proceedings from the other Fongs and any spurious attack on the conduct of Mr Chan is totally rejected by me.

Equity and estoppel

154. Mr Yau further argued that in view of the conduct of the 4th Fong, it would be unfair for the 4th Fong now to change its stand and that it is estopped from enforcing the DFA. I have already dealt with this issue earlier. What is now submitted is a round-about way of asking the court to enforce the one-eighth agreement instead. The starting point is that equity cannot be used to enforce an incomplete agreement when the essential terms have not even been agreed. Furthermore, I just cannot see how equity can be used in enforcing an alleged agreement in 1979 when circumstances were entirely different from that of today. The alleged agreement was not sought to be enforced during the lifetime of the 4th son but rather 15 years after his death. At the time of the alleged agreement in 1979, the price that was suggested was $130-$150 million. By 1994, a purchaser was prepared to pay $800 million for the properties. In 1979 only small bits of scattered land along the main road had been resumed by the Government. By now there had been extensive resumption carving up the properties into truncated parts. There is a further proposed resumption of the properties for the use of the Western Railway Corridor. This drastically altered the picture and affecting substantially the question of joint sale.

155. Further, according to the minute of the 1983 meeting of the Fongs, all that the parties contemplated was that the agreement would only have effect for seven years unless extended by further agreement.

156. Seven of the Fongs had, without the 4th Fong, gone so far as entered into an agreement in 1994 and sold their respective allocated land to a purchaser. Each for $100 million. Although Lau Yue Sum said that the contract was signed in order to enable the purchaser to bring it to Canada to persuade the Plaintiff to sell the property of the 4th Fong, it is clear from the terms of the agreement that it is not the case that the sale by the seven Fongs would only be effective if the 4th Fong agreed to sell as well. On the contrary, the 1st, 2nd, 5th and 7th Fongs had agreed to sell their allocated portion unconditionally. As far as the 3rd, 6th and 8th Fongs were concerned, their sale was not conditional upon the 4th Fong agreeing to sell its portion, but rather they were given the right to cancel the sale if the purchaser was not able to reach an agreement with the 4th Fong by a certain time or where the purchase price paid to the 4th Fong exceeded $100 million. The former solicitor of the opposing Defendants (in effect Lau Yue Sum himself) had categorically asserted in letters dated 29th December 1994 and 4th January 1995 that the seven Fongs selling their DFA land was not the business of the 4th Fong and that they would not disclose details of the 1994 sale and purchase agreement to the 4th Fong. The excuse now given that these letters were written in the heat of the moment and in retaliation to the conduct of the 4th Fong is lame and could not disguise what had transpired in 1994. With this background between the parties, I just cannot see how it could possibly be argued that the 4th Fong is nonetheless estopped from resiling from the one-eighth agreement.

Change of value

157. The value of land in the New Territories has been on the rise and because of the difference in size of the properties that were allocated to the eight Fongs in 1946, the present day value of the properties held by them are different. The difference can be shown in the summary prepared by Mr Chan showing the interest of the various Fongs under the DFA and the valuation in 1992 and under the one-eighth agreement.

However, one must judge the value that the eight Fongs received in 1946 when different properties with different use and different value were allocated to them. It is only fortuitous that the value of property in the New Territories has increased because of the development of the new towns. The equality of treatment of the eight Fongs must be judged by reference to the 1946 situation and not the present position. I find that the opposing Defendants have failed to establish the existence of the one-eighth agreement. I would dismiss their counterclaim.

XII. Conclusion

158. I would accordingly order and declare that the division and distribution of the properties under the Deed of Family Arrangement dated 20th March 1946 of the estate of Lau Wai Chau were and still are valid and binding on the Plaintiff and the 1st to 7th Defendants.

159. The parties agreed that consequential orders arising from this declaration would have to be further argued, I would direct that the hearing is to be restored to deal with these matters.