XCHRX SHENZHEN LUOHU RUNAN INDUSTRIAL LTD. CO. v. UN KAU KUNG TSO

HCMP2320/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.2320 OF 2000

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D E C I S I O N

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1. This case concerns certain lots of land at Lo Wu in the New Territories which were used as fish ponds prior to their resumption by Government on 13 July 1998. The defendant is the registered owner of the lots concerned. The plaintiff which is a company incorporated in Shenzhen claims a possessory title to the lots by reason of their continuous adverse possession of them since the early 1970s, and up to the date of resumption. What is at stake, since the Government has resumed the lots, is not the land itself but the compensation payable to the owner.

2. The plaintiff's case is that it is the successor, incorporated in 1985 under the laws of the PRC, of certain collective organisations which represented the villagers of Luohu Village, Shenzhen. For many years these organisations used to send teams of villagers who held cross-border farming permits were sent to work in various farms and fish ponds in Hong Kong Territory. Most of these fish ponds were constructed by the villagers and used by them for fishery or leasing to third parties. The fish ponds concerned in this case were excavated in the early 1970s, but the Luohu villagers had been sent across by their collectives to work the land where they were excavated even before that time. The collectives, and their successor the plaintiff, have established adverse possession by remaining in occupation of and working the land up to the date of its resumption.

3. The plaintiff commenced the action by an Originating Summons dated 10 May 2000 against the defendant, the Un Kau Kung Tso, and its manager Un Yuk Shu. The Originating Summons was later amended by the deletion of the name of Un Yuk Shu who is said to have died in 1972. On 28 July 2000 Mr Registrar Chan made an order for substituted service on the defendant. Service by advertisement was carried out. No acknowledgment of service was filed. On 17 October Sakhrani J ordered the setting down of the Amended Originating Summons and the substituted service, again by advertisement, of the Notice of Hearing. This was done, and the matter came before me for hearing on 8 January 2001. I gave judgment in favour of the plaintiff, in the absence of any representative of the defendant.

4. The applicant, Yuen King Hay, took out a summons dated 23 March 2001 to apply that he be appointed "as manager" of the defendant to represent it under Order 15, rule 13 of the Rules of the High Court and section 15 of the New Territories Ordinance, Cap.97. He also applied for the judgment to be set aside under Order 28, rule 4. He later amended the summons, by consent, to delete "as manager" so he now applies simply for appointment to represent the defendant.

5. He then applied by summons dated 3 September 2001 to amend his application, so as to rely on a new ground to set aside the judgment as irregular because the orders for substituted service on which it was based were obtained by material non-disclosure and misrepresentation on the part of the plaintiff.

6. The matter came before me on 6 September 2001 and went on part-heard on 30 November 2001. The defendant argued that, being a Tso in the New Territories, the defendant must, by section 15 of the New Territories Ordinance, be represented by a manager registered by the Secretary for Home Affairs. It is not in dispute that the applicant has not been registered as the defendant's manager, though he says that he was regularly appointed by a meeting of the members of the defendant on 18 February 2001 and applied for registration through his solicitors to the District Officer North on 21 March 2001. He also claims to be a member of the defendant.

7. The applicant's case for setting aside the judgment is that the plaintiff well knew that some members of the defendant had already applied to the Hong Kong Government for "inheritance" of the suit land and for change of manager and compensation for land resumption in early 1998. It knew the Lowu Yuen Clan Association ("the Association") was collecting rent from some tenants on the suit land. It knew the address of the Association and it knew that the Association was assisting villagers in their claims for the defendant's land. It further knew that there would be living beneficiaries of the defendant. However it did not make inquiries with the persons whose claims it knew about, or with the Association; nor did it serve the Originating Summons at the office of the Association; and so it obtained the orders for substituted service by material non-disclosure or misrepresentation.

8. Accordingly, says the applicant, the ex parte orders should be set aside because they were improperly obtained. It follows that the default judgment was obtained following irregular service, and should be set aside ex debito justitiae without considering the merits of the defendant's case. Alternatively, the applicant claims that if the service was regular the court should exercise discretion to set aside the judgment on the ground that the defendant has a real prospect of success. The application of Chinese custom and customary right to land cases in the New Territories is mandatory; the defendant is a Tso or lineage trust under Chinese customary law. Any English law, including the rule against perpetuities has to be disregarded. Therefore, as a matter of law, the provisions of the Limitation Ordinance do not apply to land held by or on behalf of a Tso. If those provisions do apply, by section 22 of the Limitation Ordinance the limitation period may be extended where the persons entitled to bring an action to recover possession are under a disability e.g. minority. The limitation period is either the normal period or six years from the date the disability ends, whichever is the longer, subject to a maximum period of 30 years. Here the limitation periods concerned would run from 1973 or 1976 for 20 years, but the applicant has identified three beneficiaries born in 1979, 1983 and 1986 and their minorities would extend the relevant limitation periods.

Locus Standi

9. The second part of the hearing was concerned mainly with the applicant's locus standi. When the matter went part-heard, I indicated that it would be necessary to decide the question of the applicant's locus standi to make the application to set aside the judgment, because the court cannot set it aside except at the instance of one who has the locus standi to make the application. The defendant itself is not represented.

10. Accordingly the applicant has amended his application, and applies as an alternative to his being allowed simply to represent the defendant, to be added as 2nd defendant.

11. He says that he is both the appointed but as yet unregistered manager and a member and as such a beneficiary of the defendant Tso. As either he could no doubt be appointed to represent the Tso under Order 15, rule 13 which provides :

" (1) In any proceedings concerning -

(a) the estate of a deceased person, or

(b) property subject to a trust, or

(c) the construction of a written instrument, including an Ordinance or any other written law,

the Court, if satisfied that it is expedient so to do, and that one or more of the conditions specified in paragraph (2) are satisfied, may appoint one or more persons to represent any person (including an unborn person) or class who is or may be interested (whether presently or for any future, contingent or unascertained interest) in or affected by the proceedings.

(2) The conditions for the exercise of the power conferred by paragraph (1) are as follows -

(a) that the person, the class or some member of the class, cannot be ascertained or cannot readily be ascertained;

(b) that the person, class or some member of the class, though ascertained, cannot be found;

(c) that, though the person or the class and the members thereof can be ascertained and found, it appears to the Court expedient (regard being had to all the circumstances, including the amount at stake and the degree of difficulty of the point to be determined) to exercise the power for the purpose of saving expense.

(3) ..."

Section 15 of the New Territories Ordinance provides :

"Whenever any land is held from the Government 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 to represent it. Every such appointment shall be reported at the appropriate New Territories District Office of the Home Affairs Department, and the Secretary for Home Affairs on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager who 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 were sole owner thereof, subject to the consent of the Secretary for Home Affairs, 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 thereof in the presence of the Secretary for Home Affairs 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 Secretary for Home Affairs may on good cause shown 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 do not within 3 months after the acquisition of the land make and prove the appointment of a manager, or within 3 months after any change of manager prove the appointment of a new manager, it shall be lawful for the Government to re-enter upon the land held by such clan, family or t'ong, which shall thereupon become forfeited. Such re-entry shall be effected by the registration of a memorial thereof in the appropriate New Territories Land Registry."

12. The manager of a Tso must be appointed by members and not otherwise. In Chan Choy Fong v. Secretary for Home Affairs [1997] 4 HKC 122 the Court of Appeal held that :

"... the solution on the death of the managers was for the members of the Tso to get together and appoint a manager, if not unanimously, then by a majority or even by a relatively substantial minority who were able to show that the appointment should be received under Section 15 of the New Territories Ordinance."

13. It is convenient to set out first what is required for membership in a Tso; see the judgment of Cheung J (as he then was) in Tang Yau Yi Tong & Anor v. Tang Mou Shou Tso & Ors [1995] 2 HKC 245 at 253 :

"Tso

1) A tso may be shortly described as an ancient Chinese institution of ancestral land holding whereby land derived from a common ancestor is enjoyed by his male descendants for the time being living for their lifetime and so from generation to generation indefinitely. Thus every male descendant of the common ancestor automatically becomes entitled at birth to an interest in the land for his lifetime, on his death his interest merges so as automatically to enlarge the interest of the surviving male descendants; thus his interest at any given moment during his lifetime depends on the number of male descendants then living and on his death it forms no part of his estate (Per Mills-Owens J in Tang Kai Chung v. Tang Chik Shang at p.279).

2) A tso is named after the common ancestor (Tang Kai Chung v. Tang Chik Shang p.280).

3) There are three ways in which a tso can be formed -

a. A tso is formed not by the common ancestor but by his son or sons on or after his death and as a matter of filial duty in accordance with Confucian tradition for the purpose of veneration of the common ancestor. A tso may be formed when the sons inherited land from the father and set aside part of the land in the name of a tso and divide the rest among themselves (Baker p.50, p.15 of Wong).

b. A living male person on purchasing property had it conveyed not to himself but to his tso - in effect creating a settlement (Tang Kai Chung v. Tang Chik Shang p.281).

c. A tso may be formed after the death of a male person dying intestate without male issue, by means of the adoption of a son for him after his death (Tang Kai Chung v. Tang Chik Shang p.281).

4) The tso or the clan is divided up into a number of fong. If a man dies and has three sons, then each of those sons will eventually form a fong, a part of the tso, and all succeeding sons of those sons will form part of that fong (per the evidence of Akers-Jones in Tang Kai Chung v. Tang Chik Shang at p.306).

5) The custom is to preserve the land intact. Those who are at present managing it have to pass it on intact to succeeding generations and not to do this would indeed mean an abrogation of their customs or traditions (Per the evidence of Akers-Jones in Tang Kai Chung v. Tang Chik Shang at p.308)."

See also Liu JA, in Tang Yau Yi Tong & Anor v. Tang Mou Shou Tso & Ors [1996] 2 HKC 471 CA at 478 :

" ... What Chinese custom prohibits is the admission as members of other direct male descendants than those of the ancestor nominated (the focal ancestor) in a tso or tong. In other words, membership of a tso or tong is confined to the direct male descendant of its focal ancestor. That is sheer common sense because no one but the direct male descendants of a focal ancestor would revere and honour him. Direct male descendants of a brother of the focal ancestor or 'originator', as the judge put it, would not worship him and would be excluded from membership."

14. The applicant has not been registered as manager. If he is to prove that he has been appointed manager he must prove that those who appointed him are direct descendants of Un Kau Kung. If he is to prove that he himself is a member he must prove that he is a direct descendant of Un Kau Kung.

15. The plaintiff relied in his first affirmation on a family tree which showed that Un Kau Kung of the 15th generation of the Un or Yuen clan had three sons, Yan Ching, Chung Ching and Ng Shan and a membership list which showed that he and two of the minor beneficiaries were descendants in the Yan Ching branch or fong.

16. The plaintiff's manager Yuen Hon Ling has now affirmed to and exhibited a Chinese document, found in the reserve section of the Hong Kong University Library, entitled "The Genealogy of Yuens in Lowu" which bears to have been brought up to date as at 1919 and includes the 29th generation. This document shows that Un Kau Kung had only two sons, Yan Ching and Sze Ching. Ng Shan was actually the son of a collateral of Un Kau Kung and therefore could not be a member of the Tso. But in any event, he believes, according to the word of an elderly local man named Yuen Bing Lam of Luohu Village in Shenzhen, the applicants father was Yuen Ching Wo and his grandfather was Yuen Wu Shu, neither of whom is shown in the Genealogy. Therefore the applicant cannot be a descendant of Un Kau Kung. For similar reasons, doubt is also cast on the genealogy of the applicant's supporting affirmant, Yuen Hoi Sum.

17. The applicant's reply is that his grandfather was indeed Yuen Ching Wo; the latter's father was Kap Yau, and his grandfather Kam Kwai, who appears in the Genealogy. In fact in the Genealogy Kam Kwai is not shown as having any male offspring; it does not say that he had none; it does not mention them at all. The applicant says that this does not mean he had none. Many other entries are shown which are silent as to male offspring, without indicating that there were none. The applicant also says that while Ng Shan and Chung Ching were the sons of a brother of Kau Kung all the Yuens know that there are three branches of the family namely those of Ng Shan, Yan Ching and Chung Ching. He goes on to assert his belief from what others in the area have told him that he is indeed a member of the Yan Ching fong.

18. Of course if the Genealogy is correct, it means that only those Yuens who are descended from Yan Ching can be members of the Un Kau Kung Tso, which calls into question the membership list on which the applicant relies, and the power of the meeting which appointed him as one of the managers. Only members of the Yan Ching fong could do that. However the collection of genealogical information is always difficult and the results subject to error, in any culture. The fact that the Chinese culture affords great importance to family lineage and respect for ancestors means that there will be many family records but that does not mean that the records are necessarily always correct; someone has to get the information together, probably in many cases from oral recollection and error can always creep in.

19. So far as the applicant's purported appointment goes, it may have been valid or it may not; no doubt that is something on which the District Officer will have to satisfy himself in considering the application for registration; but I do not think I can make a finding either way on the basis of what I have seen in the affirmations. As to whether the applicant himself can be ruled out of membership by the absence of an entry for male offspring for Kam Kwai of the Yan Ching fong, who according to the applicant is his great-grandfather, I am also left in a rather uncertain state. I am not prepared to say that the applicant cannot be a member of the defendant Tso. He may be or he may not.

20. If he is not, I do not see from section 15 of the New Territories Ordinance that this precludes him from appointment as manager if that is what the members want. Further I do not see that Order 15, rule 13 requires any particular connection with the trust, in a person appointed by the court to represent it. The court can and often does appoint an administrator ad litem. It seems to me that the applicant has demonstrated sufficient interest for him to be appointed to represent the defendant under Order 15, rule 13. I will therefore make the appointment as applied for, but refuse the alternative application to join him as a defendant.

Regular or Irregular Judgment

21. The judgment was obtained after substituted service of both the Originating Summons and the Notice of Hearing, in terms ordered by the court. What the Registrar and the Judge had to consider was whether substituted service by advertisement would be effective. See Chan Yeuk Mu v. Ng Shu Chi [1999] 2 HKC 702. There is no reason to think that they did not. Perhaps service might have been better effected in a different way though it is by no means clear that service on the Yuen Clan Association would have been effective. That Association is not coextensive with the defendant. It seems to me that the substituted service was regular service and there is no reason to set aside the orders for service. It follows that the judgment was regular.

Discretion to Set Aside

22. This being so, the position is analogous to that where a plaintiff obtains judgment in default of notice of intention to defend. It is for the defendant to show a real prospect of success; see Alpine Bulk Transport Co Inc. v. Saudi Eagle Shipping Co. Inc. [1986] 2 Lloyd's Rep.221, CA.

23. However the applicant relies heavily on the case of Tsang Wing Lung v. Tsang Lun & Anor [1993] 2 HKLR 23. In that case Sharwood DJ considered the effect of section 13 of the New Territories Ordinance, which provides :

"13. In any proceedings in the High Court or the District Court in relation to land in the New Territories, the court shall have power to recognise and enforce any Chinese custom or customary right affecting such land"

and decided following Tang Kai-chung v. Tang Chik-shang [1970] HKLR 276 that it was mandatory and not discretionary. He referred to unchallenged expert evidence that "under Chinese law and custom there are no rules of limitation. As general concepts limitation of actions and prescription of rights were unknown to the traditional Chinese legal system and in fact it was not uncommon in traditional China to litigate, or even to re-open litigation, in respect of disputes over property many decades or even centuries after the occurrence of the events on which the outcome of such disputes depended". He went on to hold that the Hong Kong law of limitations, is an "aspect of English law", and that, even though it might be procedural, it would affect the operation of the substantive Chinese law which applies to New Territories land by virtue of section 13 of Cap.97. Therefore it must be disregarded, in exactly the same way as Mills-Owens J in Tang Kai-chung disregarded the rule against perpetuities.

24. It is argued that this is an obiter dictum of Sharwood DJ, who decided the case before him on the effect of section 20 of the Limitation Ordinance, and that in any event it is only persuasive. However counsel for the plaintiff concedes that it is an arguable point though he does not accept that it gives the defendant a real prospect of success. Counsel for the applicant says that Sharwood DJ was applying a well known principle which had already been applied by Mills-Owens J. In any event he says it is for the plaintiff to prove on the balance of probabilities that they had extinguished the right and title of each and every beneficiary before the date of resumption.

25. It seems to me that in view of these authorities the defendant has a real prospect of success. But in any event, given the nature of the Tso as set out by Cheung J in Tang Yau Yi Tong & Anor v. Tang Mou Shou Tso & Ors it seems to me that if it is not the case that the rules of limitation have no application to a Tso, to establish limitation it would be necessary to prove that the right and title of each and every beneficiary had been extinguished. The nature of a Tso must be that minor beneficiaries are being born all the time.

26. I will therefore allow the application to set aside the judgment also.

27. Directions for the future conduct of the action are sought in paragraph 4 of the applicant's summons dated 23 March 2001, and are necessary. The matter is now adjourned before me to a date to be fixed, to deal with directions and costs.