MAN PING NAM v. MAN TIM LUP AND OTHERS

CACV 39/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 39 OF 2010

(ON APPEAL FROM HCMP NO. 2417 OF 2007)

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BETWEEN

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JUDGMENT

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Hon Tang Ag CJHC:

Introduction

1.  Lot Nos. 733RP, 674RP, 669RP, and 661CRP, all in Demarcation District 99 in San Tin (“the Properties”) have been registered in the name of the Man Sham Chung Wui (文深涌會) (“the Wui”) since the Block Crown Lease dated 27 March 1905.  It is not known when the Wui was established.  However, the Man clan traced their descent from the descendants of Man Tin Cheung（文天祥）who settled in the New Territories at the end of the Song Dynasty.

2.  According to a list of members dated September 2007, the Wui had 24 members.  9 of them were Tsos or Tongs (who are the 1^st to the 9^th Respondents).  The others were individuals (or pairs of individuals), all surnamed ‘Man’.  The Wui is notionally divided into 64 sheks “(石)” (actually 63.98 sheks).  One could see from the List of Members as of September 2007, that the interests of the members ranged from 1 dou “(斗)” (1/10 of a shek) to over 20 sheks.  When this application was made (30 November 2007) there were only 14 individual members, who are the 10^th to the 23^rd Respondents.  Presumably, the share of 文炳南 (1.43 shek), one of the 24 members, had been transferred to one or more of the other members.  There is no dispute that shares in the Wui are transferrable.

3.  Under section 15 of the New Territories Ordinance, Cap. 97 (“NTO”):

“Whenever any land is held from the Government under lease … in the name of a clan, family or t'ong, such clan, family or t'ong shall appoint a manager to represent it. …”

4.  The applicant, Man Ping Nam, is the sole surviving manager of the Wui and was appointed in accordance with section 15.  He has been a manager since 1949.  Section 15 also provides that the manager,

“… 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 …”

5.  The Properties extend over a vast area totalling about 6,899,199 square feet (640,957.18 square metres).  The Properties are located within what is called the “Shum Chun River flood plain”.  About 90% of the area is now fish pond and about 9% is being used for open storage.  The total annual rental income derived from the letting of the Properties was, according to the Applicant, in the region of about $3.5 million.  Further, according to the Applicant, the Properties are occupied not only by tenants and licensees, as well as by squatters. 

6.  In March 2009, the Properties were valued on an “as is” basis (that is, without delivery of vacant possession) at about $647 million.   A valuation report dated 29 October 2010, obtained for the purpose of the appeal, valued the land on the same basis at HK$869,000,000.   

7.  Because a majority of the members had wanted to sell the Properties, by a notice dated 5 February 2007, the Applicant convened a meeting of the members of the Wui:

“… to discuss and, if they so wish, to pass … (resolutions to sell all the lands) of the Wui.”

8.  A meeting was duly held on 19 March 2007, the minutes recorded that a majority (approximately 92% interest) of the members had voted in favour of resolutions authorizing the Applicant to sell the Properties on certain terms.  The resolutions passed included authority to apply to the District Officer for consent under section 15 NTO as well as applying to the court for directions relating to the proposed sale.

9.  According to the Applicant’s affirmation filed on 30 November 2007, the District Officer, Yuen Long, would await the court’s decision before considering “the appropriateness of issuing consent and, if so, whether any condition should be imposed”.

10.  By an Originating Summons issued on 30 November 2007 (and amended on 24 June 2008), the Applicant sought directions from the Court on the mode and manner of the sale of the land. 

11.  The application was supported by 11 of the 23 members, namely, the 2^nd, 4^th, 6^th, 9^th, 10^th, 13^th, 16^th, 17^th, 20^th, 21^st and 22^nd Respondents.  At that time, they together owned 48.22 sheks, being 75.37% of the total 63.98 sheks of interest in the Wui.  Since the filing of the Notice of Appeal, however, there have been changes in their interests such that of the original 11 Respondents, only the 4^th, 10^th, 21^st and 22^nd continue to have an interest in the Wui, and their collective interests have been increased to 51.47 sheks and 80.45% respectively. 

12.  The application was made under section 56 of the Trustee Ordinance, Cap. 29, as well as O. 85 of the Rules of the High Court, Cap. 4A.  The learned Recorder, Mr. Recorder A. Ho refused to exercise his discretion under section 56.  We have had no submission on section 56 so I shall ignore it.  The learned Recorder was prepared to entertain the application under O. 85. 

13.  The learned Recorder said:

“59. In the case of managers of t’sos and t’ongs, by treating them as trustees in whom the land is vested (see Mills-Owens J in Tang v Tang (supra)), they must be subject and amenable to the supervisory jurisdiction of the Court. Indeed, in Tang Chun Kit v Tang Lo Ping (HCMP 5529 of 2000, 9 September 2005), Lam J treated the proceedings before him concerning distribution of the t’so’s income as akin to an administration action under Order 85.

60. In the case of disposition of land of a t’so or t’ong, while the Secretary for Home Affairs has been entrusted with the role to grant or refuse approval, I do not believe such role should displace the jurisdiction of the Court in giving guidance to the managers in appropriate cases.  Indeed in the present application, as Mr Neoh pointed out, the Court is being asked only to give directions on the mode and manner of the sale.  Even if the Court grants the application, the Applicant will still have to seek the Secretary’s approval for any proposed sale of the Properties.”

14.  With respect, I agree.

Land Entitlement Book

15.  Every member was issued with a “Land Entitlement Book” （業主田份簿）, on which what purported to be Articles（章程）of the Wui appeared.  The Articles appearing on the Land Entitlement Books (in use before the Applicant’s appointment as a manager in 1949 and up to 1995) (“the old Articles”) are different from the Articles in the current Land Entitlement Books (in use since 1995) (“the current Articles”).  The Articles are important and are set out in full below: 

The Old Articles

「（一） 本會所有業主同意將深涌潮田六十四担毛種組織聯合一齊成為今日的深涌會員各分發田份部為証。(Old)

（二） 本會應由業主以投票方式選出司理人四名担當本會一切業務。(Old)

（三） 本會司理人沒有權力將本會任何物業出賣司理人只能將本會業務發展利益以造福本會為宗旨。(Old)

（四） 本會議明每年分派田租兩次所有業主要憑業主部領取田租領租人必須親筆簽名方能有效。

（五） 本會所有業主人如有遺失田份部（應）立刻向本會司理人處報知以便重新發還。

（六） 本會所有業主如欲將本會田份轉讓別人時一定要本會司理人証明改正姓名以便本會今後通訊容易。」

The New Articles

「深涌會業主章程

（一） 本會所有業主同意將深涌潮田合共禾民種陸拾石組織聯合一齊，成為今日文深涌會成員，今由司理發給業主田份部為證。(Current)

（二） 本會應由陸拾石業主以投票方式選出司理負責本會一切業務。(New)

（三） 當選為本會司理人祇能將本會業務發展利益，造福本會為宗旨，如有買賣時必定召開業主大會商討事宜，以多數票選為決定，至於小數票反對者作為無效。(New)

（四） 本會訂明每年分派田租兩次，所有業主要憑業主部領取田租方為有效。

（五） 本會所有業主如有將其名下田種轉讓與別人時一定要本會司理人證明更正登記轉名手續以便日後通訊方便。」

16.  Article 1 of both versions of the Land Entitlement Books stated that the Land Entitlement Book was issued as evidence of the agreement of all the owners to group their land together and become members of the Wui. 

17.  Article 2 of both versions provided for election of managers by the owners.

18.  Regarding the current Article 3, the learned Recorder said:

“36. … The essence of the current Article 3 is to render it valid and binding on members resolutions that are passed by a majority of votes at a meeting of the Wui in respect of any sale and purchase transaction. It provides specifically that any objections of the minority are to be disregarded.”

19.  Whereas the old Article 3:

“35. … provided that managers had no authority to dispose of properties belonging to the Wui. The managers were only authorized to develop the business of the Wui in furtherance of its interest.”

20.  The old Article 4 provided that rent would be distributed twice yearly on production of the Land Entitlement Book and against the signature of the person collecting the rent.  The current Article 4 only required the production of the Land Entitlement Book. 

21.  The old Article 6 and the new Article 5 required any transfer to be reported to the manager(s). 

22.  The learned Recorder noted in para. 32 of his judgment that:

“32. … the Resolutions fell short of a unanimous vote of all the members of the Wui.”

23.  The learned Recorder examined the old as well as the new Articles, and concluded:

“44. I have not received evidence as to the manner in which the current Article 3 was introduced. Absent satisfactory evidence, I feel unable to conclude that “the majority rule” has been validly adopted as the rule governing disposition of the Wui’s landed properties. I may also add that in considering the validity of “the majority rule”, the Court will further need to be satisfied that the adoption of such a rule was not precluded by any customs or customary law applicable generally to an institution of this nature (on which there is presently no evidence before the Court).

45. It follows, therefore, that I will be unable to conclude that the Resolutions had been validly passed at the Meeting to vest the Applicant with the authority to proceed with the sale of the Properties.

46. I wish to stress, however, that it is not my finding that there was a custom, whether of a general nature or specifically applicable to the Wui, to require the unanimous consent of its members in the disposition of landed properties.  My conclusion is based on the state of the evidence before the Court.  Questions as to the existence or otherwise of such a custom may have to be revisited when the evidence is available.”

The Appeal

24.  This is the Applicant’s appeal.  The appeal is supported by Mr Aidan Tam, who appeared for the 2^nd, 4^th, 6^th, 9^th, 10^th, 13th, 16^th, 17^th & 20^th to 22^nd Respondents.  On appeal, Mr Anthony Neoh, SC, who appeared for the Applicant together with Mr K M Chong and Mr Ernest Koo, submitted that the learned Recorder erred in holding that in the absence of evidence of a custom that the members of the Wui could resolve to sell its property on a majority vote, he could not say that any resolution to sell on a majority vote was valid.  Further, the learned Recorder erred in failing to give effect to the new Articles.  He also submitted that both the new and old Articles were binding on the members as a result of an estoppel by convention.

25.  The learned Recorder said that the Land Entitlement Book:

“20. … suggested that properties belonging to the Wui were pooled together by members and dedicated for the development of the Wui’s own business and affairs. No reference was made to ancestral worship or some such purpose. …”

26.  And that:

“21. On balance, … it would appear that the Wui was an association akin to a co-operative society where members held distinct shares of interest in it. …”

27.  It is well settled that under Chinese Customary Law which applies to the New Territories, unanimous consent of the members are required for a sale of land owned by an ancestral Tso or Tong.  Here, as the learned Recorder has correctly pointed out:

“21. … There is no evidence to suggest that the association was ancestral in nature or that its properties were in any way tied to ancestral worship.”

28.  Moreover, the learned Recorder was careful to mention that it was not his finding that there was any custom which requires unanimous consent in the case of any sale of land owned by the Wui.  As he said there was no evidence that there ever was such a custom.

29.  Mr Neoh SC submitted that the learned Recorder erred in placing a burden on the Applicant to disprove any such custom.  He submitted that in the absence of any custom requiring unanimous consent of the members the court should proceed on the basis that unanimous consent is not required. 

30.  At first instance, in addition to the parties who were legally represented, several persons addressed the learned Recorder on behalf of some of the Respondents.  They were:

(1)   Man Chung Hing（文中慶）, a manager of the 7^th Respondent and a member of the 1^st Respondent;

(2)   Man Lin Tai文連泰, a manager of the 8^th Respondent;

(3)   文國樑 (whose name appeared as 文國良 in the transcript)，a member of the 1^st, 3^rd, 4^th and 5^th Respondents, though not a manager of any of them;

(4)   文國堂，a member of the 1^st, 3^rd, 4^th, 5^th and 7^th Respondents, though not a manager of any of them.

31.  It appears that they addressed the court as individuals and not as representatives of any of the Respondents.  That does not matter because we are concerned with the validity of their submissions, which does not depend on their capacity.  We have been supplied with a transcript of their submissions. I will deal with them briefly. 

32.  Man Chung Hing made the point that the 7^th Respondent’s share in the Wui was ancestral property, and the rent received in respect of their share would be used for ancestral worship and also that at a meeting of the 7^th Respondent they had resolved against any sale.

33.  Man Lin Tai文連泰 told the court that he had no personal view on the matter but that the 8^th Respondent had not passed a resolution to approve any sale.

34.  文國樑 told the court that he was the most senior member, other than those who were not in good health, of the various tsos, of which he was a member.  He did not contend that all the properties registered in the name of the Wui were ancestral property. He pointed out the obvious fact that some of the members were individuals, but he submitted that he could identify that part(s) or portion(s) of the Properties which belonged to his tsos.

35.  文國堂 is also a member of the 1^st, 3^rd, 4^th, 5^th and 7^th Respondents.  He told the court that from 1992 he had bought 16.6 sheks of interests in the Wui for a company at $5,000,000 per shek, and his father Man Ying Lam 文英林 had bought 5.25 sheks for another company.  He said, in about 1998, the entire 21.85 sheks were eventually transferred to Man Chiu Tai文招泰, the 3^rd named 4^th Respondent as well as the 21^st Respondent.

36.  By an order of the court made on 17 October 2008, the Respondents were given leave to file affidavits within 14 days of the Order.  It was ordered that no further affidavit should be filed without the leave of the court.  None of the persons who addressed the court had filed any affidavit nor asked the court for leave to do so.  What 文國堂told the court was not evidence and could not be treated as such.  In any event, although it has been suggested that shares in the Wui could only be transferred to a member of the Man clan, which I will deal with below, there is no, nor can there be, any suggestion that members of the Wui could not hold any share in trust for persons who are not members of the Man clan.

37.  In my view, the learned Recorder has rightly rejected the suggestion the Properties were “ancestral land belonging to the Man clan”.  The learned Recorder has also rightly held, in respect of the Properties which were or might have been contributed to the Wui by any of the tsos or tongs, that:

“25. … There is nothing to suggest that the Properties, whatever their origin, remained tied to the purpose of veneration of the Man ancestors after they had been put into the hands of the Wui. As already noted, the older version of the ‘Land Entitlement Book’ suggested otherwise.”

38.  Although the learned Recorder had made no express finding, it seems to me clear that none of the members of the Wui could claim to be the sole owner of any part or portion of the Properties.  To allow any such claim would cut across and trump the statutory title (which is related in the Wui) based on the NTO.  That would not be allowed.  See the dictum of Wu Koon Tai and Another v Wu Yau Loi [1996] 2 HKLR 477, 482J, given in a different but not dissimilar context.

39.  Since the resolution to sell was passed by an overwhelming majority, the only issue before the learned Recorder was whether unanimous consent was required.  It was argued on behalf of some of the Respondents that unanimous consent was required because the Properties were held for ancestral worship purpose.  That having been rejected, rightly so, in my view, the learned Recorder ought to have concluded that the resolutions had been properly passed. 

40.  Para. 1001 of Halsbury’s Laws of England, Vol. 35, stated that the rules of law affecting perpetuities are based upon considerations of public policy.  It went on to quote what Jekyll MR said in Stanley v Leigh (1732) 2 P Wms 686 at 688 that it is contrary to public policy for land to:

“… (remain) for ever or for a long time unalienable or untransferrable from one hand to another, being a damp to industry and prejudice to trade, to which may be added the inconvenience and distress that would be brought on families whose estates are so fettered”.

41.  Although we are not concerned with the rule against perpetuities, similar considerations apply here.  It is against public interest for land not to be freely alienable.  In the case of ancestral land, which by Chinese custom are meant to be held in perpetuity, there is good reason to permit sale only when there is unanimous consent.  In the case of other land, I do not believe the court should, in the absence of clear evidence of a custom to the contrary, hold that the land held by a Wui may not be sold except with the unanimous consent of all its members. 

42.  Furthermore, any such custom must be certain, in respect of its nature generally, as well as in respect of the locality where it is alleged to exist, and in respect of persons alleged to be affected by it.  Kan Fat-tat v Kan Yin-tat [1987] HKLR 516 at 541D.  Vol. 12(1) Halsbury Laws of England, para. 615.  Anyone who relies on an alleged custom that land held by a Wui shall not be sold except with the consent of all its members must prove any such custom clearly.

43.  There is nothing in the old Articles which supports the view that unanimous consent was required.  The Old Article 3 put a fetter on the power of the manager(s) to sell.  However, the imposition of an express fetter suggests that absent the fetter the land might otherwise be sold by the managers.  Nor had the old Article 3 placed any fetter on the right of the members to sell.  As Mr Neoh has submitted, Article 2 (both old and current) which provided for the election of managers support majority rule.

44.  The old Articles were in use from at least 1948 to 1995.  There is no dispute that the old Articles were binding on the members.  The issue at the hearing was whether they had been replaced by the current Articles. 

45.  The learned Recorder was not satisfied that the new Articles had been adopted by the members.  In para. 38 he mentioned the fact that:

“38. … Man Ying Lam (文英林), who at least until October 2007 was a manager of Man Sung Yeh Tso (文莘野祖), had queried whether the current Article 3 had been properly adopted as the Wui’s constitution. He stated in his affirmation that despite his being the manager of the t’so which was a member of the Wui, he was not aware of any meeting of the Wui held for the purpose of discussing the adoption the current Article 3.”

46.  Mr Tam submitted that the learned Recorder ought not to have taken the affidavit of Man Ying Lam into consideration.  He submitted that the affidavit was filed for other purposes and was not evidence before the learned Recorder in respect of the Applicant’s application.  I will not go into any detail in respect of this submission.  There are two simple answers.  First, the affidavit of Man Ying Lam was referred to in the skeleton submission of counsel for the Applicant in the substantive hearing before the learned Recorder. Secondly, it was also referred to by Mr Chong during the submission of Man Lin Tai文連泰.  Moreover, the affidavit raised an obvious issue about whether and, if so, how the current Articles had replaced the old Articles, which the learned Recorder, exercising his supervising function was entitled to raise.

47.  Mr Neoh submitted the current Articles have been acted on and therefore binding on the parties because of estoppel by convention.  He relied on Man FongHang v Man Ping Nam and others (HCA 7935 of 1998, 11 December 2003), which involved another Wui of the Man clan containing overlapping membership namely the Man Shek Chung Wui (文石涌會) in respect of which the Applicant was also the manager.  There the plaintiffs (some of the members) relied on an article having been in a Land Entitlement Book issued by the Wui since 1981 (similar to the current Article 3), and contended that it had been adopted by members of the Wui, and the managers should be bound by them.  The submission advanced on the Applicant’s behalf in that case was that:

“179. … in the absence of any resolution passed by the Wui adopting the articles, they could not have any legal effect until each and every member of the Wui agreed to the adoption of the same to change the term of the trust.”

48.  It was rejected by the court.  There, Deputy Judge Lam (as he then was) said:

“188. Even if I were wrong in that regard, the principle of estoppel by convention could be applied. The law can be taken from the following dicta of Lord Steyn in Republic of India v India Steamship [1998] AC 878 at p. 913 E to G,

‘It is settled that an estoppel by convention may arise where the parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one or acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption … It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention.’

See also Chitty on Contracts, 28th Edn., Vol. 1 Paras. 3-100 to 3-106.

189. On the evidence, it was a common assumption of all the parties interested in the present action, namely the Plaintiff and the Defendants, that Article 3 of the Land Entitlement Book was binding and the managers had to obtain the approval of the majority before they could sell the land. …”

49.  That was a finding on the facts of that case.  It will be noted that in Man FongHang, it was the manager who contended that the Articles were not binding, he, having on basis of the Articles, convened and held the relevant meeting.  This is not such a case, although the members had attended the meeting, the current Articles were not referred to in the notice convening the meeting, the minutes of the meeting, or the ballot paper.  So I do not believe the learned Recorder’s finding that the current articles are not binding on the members cannot be faulted.

50.  On that basis I believe the learned Recorder should have dealt with the application on the basis of the old Articles.  As I have said the old Articles are inconsistent with a requirement of an unanimous decision of the members before a sale could be effected. 

51.  So, in all the circumstances, I am of the view that since the Wui was not established for the purpose of ancestral worship, the applicant could act on a resolution passed by a majority of its members to sell the Properties.  That being the case I am prepared to give appropriate directions for sale under O. 85 of the Rules of the High Court, Cap. 4A.  There is nothing in any of the submissions made to us which requires a different conclusion. 

52.  At the hearing of the appeal, Mr Man Lin Tai, who had addressed the learned Recorder, appeared on behalf of the 8^th Respondent.  He has referred us to a document dated 1945.  There a Man Dat Wun 文達穩 agreed to sell 5 dous of interest in the Wui.  In the document of sale, it was stated that it was after he was unable to sell to a member of his family that he agreed to sell to another family, also surnamed Man, through the introduction of a middleman（先問家親人等各不能承後託中人文根壽引至文珠水家父子說允肯入頭承斷）.  I do not believe this is evidence that there was a rule of the Wui that a purchaser of shares must be a member of the Man clan. 

53.  He also made the point that some of the members may be holding their interests on behalf of the developers.  There is no evidence to that effect.  The allegation of 文國堂is not evidence.  In any event, I do not believe in law there can be any objection to that.

54.  Mr Man Chung Hing（文中慶）, a manager of Man Sheung Pak Tso (文商伯祖), the 7^th Respondent, also addressed us and provided a further written submission dated 17 November 2010 after the hearing.  He basically repeated his submissions before the learned Recorder.  He also complained that there had been no meeting to appoint the new managers of the 1^st Respondent, the Man Sung Yeh Tso (文莘野祖).  Whether that is so or not, is not something that we can decide on appeal.  If there was any dispute over the representation of the 1^st Respondent, the dispute should have been raised and determined at first instance. 

55.  One 文國樑, who was absent at the hearing of the appeal, made 2 written submissions dated 16 and 18 November 2010.  Essentially, he submitted that the land is Tso property and therefore should not be sold. 

56.  But it is not disputed that not all members of the Wui was Tsos or Tongs.  A majority of the members are individuals.  Most importantly, the Wui was not formed for ancestral worship. 

57.  Brisilver Investment Ltd. v. Wong Cho Mui, HCMP 2038/1997 (unreported, 18 July 2000, Chung J) is authority that although the Partition Ordinance, Cap. 352, has no application to land wholly owned by a Tso, the fact that a Tso is a co-owner would not preclude the application of the Partition Ordinance to the land.  In that case, the court ordered a sale under the Partition Ordinance, notwithstanding objection by a Tso which was a one-third owner of the land in question.  So the fact that some of the members of the Wui are ancestral Tsos cannot alter the nature of the Wui itself.

The Directions

58.  The Proposed Directions are:

“1. Subject to paragraphs 4-6 of the directions herein, the land of the Wui, namely 661CRP, 669RP, 674RP and 733RP all in Demarcation District 99 (‘the said land lots’), may be sold by the Applicant as manager of the Wui to the highest tender to be obtained by private tender or to the highest bidder from members at the meeting referred to in paragraph 3(b) below, with a reserved price being $637,000,000.00 or the open market value of the said land lots as that advised by a further valuation report to be obtained by the Wui pursuant to paragraph 2 below, whichever the higher, on ‘as is’ basis without vacant possession upon completion.

2. The Applicant as manager of the Wui shall, within 28 days after the issue of consent for sale of the said land lots under section 15 of the New Territories Ordinance, obtain from an independent valuer a further valuation report advising the then open market value of the said land lots on ‘as is’ basis without vacant possession.

3. The Applicant as manager of the Wui shall, within 28 days after the issue of consent for sale of the said land lots under section 15 of the New Territories Ordinance,:-

(a) publish a written invitation for 3 consecutive days in one English and one Chinese local newspaper for private tender to offer the purchase of the said land lots giving potential tenderers 28 days from the 1^st of the publication of the invitation to put in the tender;

(b) at the close of the time for acceptance of tender referred to in sub-paragraph (a) above, to convene a meeting of members of the Wui (‘the Meeting’) to be held not later than the 28^th day of the date of close of tender, for the purpose of members of the Wui considering and, if they choose to do so, approving the sale by the Wui of the said land lots, either by acceptance of the highest tender or the highest bidder from members at the Meeting.

4. That for the purpose of paragraph 1 herein, no tender shall be accepted by the Applicant as manager of the Wui to be valid unless and until:-

(a) the tender shall have reached the office of Messrs. Peter Mo & Co., not later than the close of business (i.e. no later than 5:30p.m.) of the 28^th day after the 1^st of the publication of the invitation to tender in one English and one Chinese local newspaper;

(b) the tender shall have accompanied with a cashier order for the sum of $50 million issued by a licensed bank in Hong Kong and made payable to Messrs. Peter Mo & Co., solicitors for the Wui;

5. The sale under paragraph 1 herein shall have been approved by a resolution passed at the Meeting (referred to in paragraph 3(b) above) by a simple majority of share of interest in the Wui.

6. Members of the Wui shall be entitled to purchase the said land lots at a price the same as or higher than the price offered by the highest tender by bidding at the Meeting (referred to in paragraph 3(b) above) provided that the exercise of such right of members shall be subject to the following preconditions:-

(a) that he shall have deposited an earnest money of $50 million with Messrs. Peter Mo & Co., solicitors for the Wui, not later than 7 days before the date of the Meeting; and

(b) that not less than 7 days before the date of the Meeting, he shall have given notice in writing to Messrs. Peter Mo & Co., solicitors for the Wui, of the fact referred to in sub-paragraph (a) above and of his intention to purchase the said land lots and to bid at the Meeting.

And the Applicant shall not accept the exercise of the right of members unless and until the conditions herein have been compiled with.

7. Upon completion of sale of the said land lots, all proceeds of sale of the said land lots shall be paid into a bank account in the joint names of Messrs. Peter Mo & Co., solicitors for the Wui, and Messrs. Wong & Poon, solicitors for majority members of the Wui, who shall apply the same in the following manner and priority:-

(a) to discharge any government rent, rates, title document custody fee payable in relation to the said land lots which remains outstanding and unpaid immediately before the completion of sale;

(b) to pay and/or set aside a reasonable sum for the purpose of paying all legal costs, professional fees, expenses and disbursements payable or incurred or to be incurred for the purpose of or in connection with the sale of the said land lots and the distribution of proceeds, including but not limited to the legal costs of the Applicant incurred herein and all other costs or expenses incurred for engaging Counsel (inclusive of Senior Counsel), Solicitors, Valuers and other professionals for their professional assistance in respect of all matters necessary or incidental to the sale of the said land lots and the distribution of proceeds;

(c) to pay such other costs as ordered by this Court;

(d) to distribute the remaining proceeds among the members of the Wui in accordance with their shares of interest of and in the Wui, if by a duly convened meeting of the Wui by a simple majority to distribute the same.

8. There be liberty to apply for further directions.”

59.  In Marley v. Mutual Society Merchant Bank &Trust Co. Ltd. [1991] 3 All E.R. 198 PC, Lord Oliver of Aylmerton, in delivering the judgment of the Privy Council, said at page 201D:

“A trustee who is in genuine doubt about the propriety of any contemplated course of action in the exercise of his fiduciary duties and discretions is always entitled to seek proper professional advice and, if so advised, to protect his position by seeking the guidance of the court.”

60.  This is precisely what the Applicant has done.  But Lord Oliver went on to say that if a trustee seeks the approval of the court, he surrenders his discretion to the court (at 201E).

61.  The Proposed Directions provided for a public tender.  However, the result of the tender is subject to a right of the members to purchase the land at the same or a higher price:

“… by bidding at (a members) the meeting”. (Para. 6 of the Proposed Directions)

62.  At the hearing, I expressed my reservation about the proposal.  A public tender held under such circumstances is unlikely to elicit the best offer.  Any person tendering would know that the highest tender would not result in a sale; it would be followed by bidding at a members’ meeting.  There would be a further opportunity at a members’ meeting to be convened under para. 3(b) of the Proposed Directions to bid for the land through a member, presumably by open bidding.  Furthermore, a member with a large interest could easily outbid other bidders.  The presence of a person who is well able to outbid other bidders often effectively results in no competitive bid. Businessmen are in the business of making money, and they can be expected not to be engaged in any futile endeavour.  This can be seen from the oft reported lack of competition in sales under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap. 545, which by law must be sold by a public auction (section 5(1)(a)) unless agreed otherwise in writing by every owner of the lot and approved by the Tribunal in his absolute discretion: Section 5(1)(b). 

63.  If, instead of open bidding by the members, it is proposed that there should be another round of tender amongst the members, that would be an unnecessary duplication of effort.  It would be more straightforward to sell to the highest bidder (subject to a reserve price) at a tender open to all, including members.

64.  On hearing the court’s reservation, Mr Neoh, after taking instructions, agreed that the proposed ‘bidding at a members’ meeting’ is inappropriate.  He agreed that there should be sale by tender to the highest bidder.  Members of the Wui would be entitled to participate in the tender on the same conditions as other persons.

65.  Subsequent to the hearing, by a letter dated 10 November 2010, we were given a revised Proposed Directions which provides for a sale to the highest bidder by open tender with a reserved price.  Members of the Wui would be entitled to participate in the tender on the same conditions as other persons.  I am prepared to give the modified directions set out in the letter of 10 November 2010.

66.  So I would allow the appeal and give the directions sought as amended by the letter of 10 November 2010.

Hon Kwan JA:

67.  I agree with the judgment of the Acting Chief Judge.

Hon Chu J:

68.  I agree, for the reasons given by the Acting Chief Judge, that the appeal should be allowed and the directions as revised should be made.  I wish, in addition, to make one comment on the conduct of these proceedings.

69.  The only relief sought in the Originating Summons (as amended) is directions on the mode and manner of the sale of the Properties.  No declaratory relief is sought.  At the hearing, however, upon enquiries from the learned Recorder, it became clear that the plaintiff was using these proceedings to obtain a determination or confirmation that the members' meeting was validly convened, that unanimous consent was not required to sell the Properties and that the resolution to sell was properly passed in accordance with the Articles of the Wui: see for example Transcript 25M-O & 115L-M.  These are substantive issues which the plaintiff, as trustee, is entitled to seek the court's guidance if in doubt.  If the plaintiff desires the court's determination on them, the proper way is to expressly state so in the Originating Summons, setting out the specific questions that require determination.  At the same time, all the relevant facts should be clearly identified in the supporting affidavit.  Had this course been followed, these proceedings would probably have been conducted with greater economy of time and costs.

Hon Tang Ag CJHC:

70.  The appeal is allowed, and we make the direction as amended.  We also make an order nisi that:

(1)   The costs of the Applicant and the represented Respondents be paid out of the funds of the Wui on solicitor-own-client basis with a certificate for three counsel in the case of the plaintiff;

(2)   No order as to costs in respect of the unrepresented respondents.