MAN KAM LEUNG, a member of MAN KWAN YIN or IU or IM or IN TSO, suing for himself as well as for and on behalf of all other members of MAN KWAN YIN or IU or IM or IN TSO save and except the 1st and 2nd Defendants herein, MAN YIU CHUEN and MAN KWOK HUNG v. MAN YIU CHUEN AND OTHERS

DCCJ 4029/2023

[2026] HKDC 1034

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4029 OF 2023

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JUDGMENT

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Index

A.  Introduction

1.  This is the trial of P’s claim that D1 and D2 (“D1-2”), being the managers of Man Kwan Yin Tso (文君彥祖)[1] (“KY Tso”), had acted without authority and/or in breach of their fiduciary duties in leasing plots of KY Tso’s land to D3.

B.  Undisputed background

B1.  The relevant tsos

2.  This case concerns various tsos whose membership consists of descendants of the Man clan at Chau Tau Tsuen, Yuen Long, the New Territories (the “Village”).

3.  The nature of a tso was explained by Mills-Owens J in Tang Kai Chung v Tang Chik Shang [1970] HKLR 276 at 279:-

“Speaking generally, 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 lifetimes 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 life-time; on his death his interest merges so as automatically to enlarge the interests 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… A Tso is named after the common ancestor…”

4.  For the purposes of the present case:-

(1)  Since 1999, the managers of the KY Tso registered under s 15 of the New Territories Ordinance (Cap 97) (“NTO”) are D1, D2 and Mr Man Tim Fuk (文添福) (the “3^rd Manager”, together with D1-2, the “Managers”).

(2)  Due to common ancestorship, the members of the KY Tso were also members of other tsos including Ting Shi Tso (廷士祖) (“TS Tso”).

5.  From time to time, members of a tso hold meetings to discuss various matters concerning the tso and tso property. A meeting was held after a meeting notice containing the agenda items was posted in the Village. The items of discussion and resolutions passed at the meetings were recorded in the minutes which would be signed by the attendees.

6.  In the case of KY Tso, apart from the Managers, there is also an informal position known as Duty Manager (值理)[2] who serves a 1-year term under the lunar calendar. The Duty Manager’s roles include keeping the tso’s accounts and collection of rent from the tso’s tenants. P was appointed the Duty Manager of KY Tso for the lunar years of 2014 and 2016 respectively.

B2.  The Subject Lots

7.  Both TS Tso and KY Tso held various plots of land in the Village. In the case of KY Tso, its land holding includes (i) Lot 447 of Demarcation District (“DD”) 96 (“Lot 447”); (ii) Lot 10 of DD 98 (“Lot 10”)[3]; and (iii) Lot 3 of DD 98 (“Lot 3”, together with Lot 10 and Lot 447, the “Subject Lots”)[4]. The Subject Lots are the subject matter of this dispute.

8.  Like other land holdings of KY Tso, the Managers are the registered owners of the Subject Lots.

9.  Regarding the occupation status of the Subject Lots, by 2016:-

(1)  It is common ground that Lot 3 had been vacant for at least a year.

(2)  For Lots 10 and 447, although the occupation status of these lots at the material time is in dispute, it is common ground that the tso was not collecting any rent from these lots for years.

B3.  Events leading to the present dispute

10.  Upon the P’s request, on 1 October 2016, a notice of meeting was issued in the names of each of the Managers and P as Duty Manager to convene a meeting of KY Tso on 9 October 2016 to discuss matters concerning the Subject Lots (“9/10/16 Meeting”):-

(1)  According to the meeting minutes, the 9/10/16 Meeting was attended by about 32 members including P, Mr Man Yun Fuk (文潤福)[5] (“Yun Fuk”), D2 and the 3^rd Manager. Although D1’s name did not appear in the minutes, it is common ground that D1 also attended the 9/10/16 Meeting.

(2)  No resolution was passed at the meeting and the outcome of the meeting was left blank in the meeting minutes.

11.  Shortly thereafter, P instructed his solicitors, Messrs Christine M Koo & Ip (“CMKI”) to issue a letter dated 15 October 2016 (“15/10/16 Letter”) to each of the Managers stating that:-

(1)  P discovered that Lot 3 was enclosed and paved with concrete since early August 2016. P suspected that Lot 3 was illegally occupied by trespassers without the consent of KY Tso.

(2)  P claimed that he pointed out at the 9/10/16 Meeting that the Managers must be adequately authorised by KY Tso to grant any tenancy of KY Tso’s land.

(3)  As no consensus was reached amongst the members at the 9/10/16 Meeting, P demanded the Managers to convene another meeting within 14 days to discuss and determine the matters unresolved at the 9/10/16 Meeting.

12.  On 18 October 2016, a notice to hold an emergency meeting of KY Tso on 22 October 2016 was issued in the name of the Managers. The notice stated that the purpose of the meeting was to consider the response to the 15/10/16 Letter. Following the notice, a meeting was held on 22 October 2016 (“22/10/16 Meeting”) which was attended by about 20 members including P, Yun Fuk and the Managers. According to the meeting minutes, a resolution was passed by a majority of 15 members[6], providing that KY Tso shall pay all further legal expenses incurred by the Managers regarding the matters raised in the 15/10/16 Letter issued on behalf of P.

13.  On 27 October 2016, Yun Fuk issued a written offer to the Managers, indicating his interest in leasing the Subject Lots for a total annual rent of $120,000[7] over a 3-year period, and demanding that a members’ meeting be held to discuss his offer (the “First Offer”). It is not disputed that the Managers did not respond to the First Offer.

14.  By no later than 16 March 2017[8], D1-2 (purportedly as Managers on behalf of KY Tso) and D3 signed two similarly worded tenancy agreements (the “Tenancy Agreements”) to lease the Subject Lots to D3. The terms include:-

(1)  The Subject Lots shall be leased to D3 as tenant for a period of 5 years from 1 March 2017 to 28 February 2022 (Clause 2).

(2)  The annual rent for Lots 3 and 10 shall be $27,300 and the annual rent for Lot 447 shall be $12,900 (ie the total annual rent shall be $40,200) (Clause 3).

(3)  In the event of a government land resumption, D3 shall return possession of the land unconditionally and without compensation (Clause 5).

(4)  After the end of the lease term, D3 shall have priority if the Subject Lots are still available for lease. However, a new tenancy agreement must be signed and the rent shall be adjusted (Clause 7) (the “Option to Renew”).

(5)  As the Subject Lots were illegally occupied, D3 shall be responsible for clearing the site and carrying out land formation works. D3 shall also be responsible for paying compensation to the occupiers (Clause 9).

15.  On 8 March 2017, CMKI issued another letter to each of the Managers on behalf of P in respect of Lots 10 and 447 (the “8/3/17 Letter”) stating that:-

(1)  P discovered in early 2017 that tenants of the land adjacent to Lots 10 and 447 had trespassed into and occupied part of the said lots without the consent of KY Tso.

(2)  In the interest of KY Tso, P entered into discussions with the trespassers and successfully recovered possession of Lot 10 and Lot 447 in mid-February 2017.

(3)  To prevent any party from trespassing into and using any part of Lot 10 and Lot 447 without the consent of KY Tso, P had enclosed the said lots with a fence on 18 February 2017. Copies of photos showing the enclosure were annexed to the 8/3/17 Letter.

(4)  P reiterated his stance that, in matters concerning permission to use or lease out the land of KY Tso, the Managers must obtain adequate authority. Any permission given or tenancy agreement signed without such authority must be confirmed and ratified by KY Tso.

16.  On 29 March 2017, Yun Fuk issued another written offer to the Managers to rent the Subject Lots at a total annual rent of $120,000 for a period of 3 years or longer (the “Second Offer”, together with the First Offer, the “Offers”).

17.  On 31 May 2017, CMKI issued a third letter to the Managers (the “31/5/17 Letter”) claiming (amongst other things) that:-

(1)  Since the 9/10/16 Meeting, there were persons (including members of KY Tso) who had expressed interest in renting the Subject Lots for lawful use.

(2)  P was of the view that a members’ meeting of KY Tso should be convened immediately to consider the above matter. Hence, P demanded that the Managers convene a meeting within 28 days of the letter.

18.  On 7 August 2017, P commenced the present action[9] against the defendants for himself and on behalf of all members of KY Tso save and except D1-2[10].

19.  Thereafter, the Managers convened another meeting of KY Tso on 25 October 2017 to discuss the present action (the “25/10/17 Meeting”). According to the minutes, the meeting was attended by over 40 members including P, Yun Fuk and all the Managers. It was resolved at the meeting that, in accordance with the resolution passed at the 22/10/16 Meeting, KY Tso agreed to retain legal representation for D1-2. The resolution was passed with the support of 31 members (including the 3^rd Manager) and opposed by 4 members (including P and Yun Fuk).

C.  P’s pleaded case

20.  In summary, P’s case is as follows:-

(1)  At all material times, it is a custom, practice and/or convention of KY Tso that in letting out KY Tso’s property, the Managers shall consult and obtain authorisation of KY Tso at meetings (the “Alleged Custom”)[11].

(2)  Further, at a meeting of KY Tso held on 18 October 2014 (the “18/10/14 Meeting”), it was resolved that KY Tso shall adopt the so-called “Ting Shi Tso Scheme” (廷士祖方案) (“TS Tso Scheme”) for future tenancies, in that before entering into any new tenancy, KY Tso must convene a general meeting at which members could discuss and approve the new tenancies and the rents, and it was only after such approval was given at the meeting that the Managers should enter into the new tenancy agreements with the tenants[12].

(3)  Since about early 2015, Lot 3 was unoccupied and vacant[13]. Lot 10 and Lot 447 had also been unoccupied for years by about August 2016[14].

(4)  In about August 2016 when the P (as Duty Manager) found out that Lot 3 was paved with concrete and enclosed with fences without authorisation, the Subject Lots had been unoccupied and vacant[15]. Hence, he requested the Managers to convene the 9/10/16 Meeting[16].

(5)  At the 9/10/16 Meeting, D1 wrongfully proposed to lease the Subject Lot to himself. The proposal was objected to by the P and other members of KY Tso[17].

(6)  The Tenancy Agreements were null and void because:-

(i)  they had not been approved by the members at a meeting in contravention of the Alleged Custom and/or the TS Tso Scheme; and/or

(ii)  they had not been signed with the consent of the 3^rd Manager[18].

(7)  In any event, D1-2 were in breach of their fiduciary duties on account of the above and in failing to (i) accept the Offers (which carry a higher annual rent than that provided in the Tenancy Agreements); or (ii) obtain the best available rent for the Subject Lots[19].

(8)  Against D3, it is alleged that he has been in unlawful occupation of Lot 10 and Lot 447 since 7 June 2017[20].

D.  Ds’ pleaded case

21.  D1-2s’ pleaded case is as follows:-

(1)  The Tenancy Agreements were valid and duly authorised. It was denied that there was any binding requirement whether by way of the Alleged Custom or the TS Tso Scheme (in terms as alleged by P) that the Managers were required to obtain members’ approval before signing a tenancy agreement for the Subject Lots[21].

(2)  The 3^rd Manager had by conduct delegated the execution of his function as manager of KY Tso to D1‑2 and he acquiesced in or consented to the granting of tenancies of the Subject Lots to D3 even though he did not sign the Tenancy Agreements[22].

(3)  At the 9/10/16 Meeting, the majority of KY Tso members who attended were ready to pass a resolution to let the Subject Lots to D3, but no formal resolution was passed due to vigorous objections by P[23].

(4)  D1-2 denied that the Tenancy Agreements were signed in breach of fiduciary duties:-

(i)  Lots 10 and 447 were occupied by trespassers[24].

(ii)  D1-2 reached an oral agreement with D3 in about late August 2016 that, if D3 was able to remove the trespassers from Lot 10 and Lot 447, clear and level the site within 6 months, KY Tso would let the Subject Lots to D3 at an annual rent of $40,200 for a term of 5 years (the “Oral Agreement”)[25].

(iii)  In light of the Oral Agreement, D1-2 did not accept the Offers[26].

(iv)  As D3 was able to evict the trespassers and performed the site clearing and formation works on the Subject Lots in accordance with the Oral Agreement, D1-2 signed the Tenancy Agreements with D3[27].

22.  In essence, D3 took the same position as D1-2 with respect to the Oral Agreement and the Tenancy Agreements and claimed D1-2 had actual authority[28] to enter into the Tenancy Agreements[29]. As the Tenancy Agreements would have lapsed on 28 February 2022 in any event, D3 relied upon an oral licence from D1-2 that D3 may continue to occupy the Subject Lands until the conclusion of the present proceedings, after which D3 may exercise the Option to Renew (“Oral Licence”)[30].

E.  The main issues

23.  For simplicity, the following are the broad issues extracted from the parties’ agreed List of Issues (“LOI”) which are, in my view, crucial to the determination of the present dispute:-

(1)  Whether the Alleged Custom and/or the TS Tso Scheme (in the terms as alleged by P) exist[31]?

(2)  Whether Lots 10 and 447 were occupied by trespassers by about August 2016[32]?

(3)  Whether the Oral Agreement was entered into between D1-2 (as Managers) and D3 in or about August 2016[33]?

(4)  If the Oral Agreement did exist, whether D3 did recover the possession of Lots 10 and 447 and carried out the land formation works as per the Oral Agreement[34]?

(5)  Whether the Oral Agreement/Tenancy Agreements were null and void and/or entered in breach of D1-2s’ fiduciary duties in particular:-

(i)  Whether the Tenancy Agreements were executed in breach of the Alleged Custom or the TS Tso Scheme (in terms as alleged by P)[35]?

(ii)  Whether the 3^rd Manager: (i) had delegated to D1-2 his power to enter into leases on behalf of KY Tso; (ii) consented to the grant of tenancy to D3[36]?

(iii)  Whether D1-2 failed to obtain the best available market rents[37]?

(6)  What reliefs (if any) should be granted?[38]

F.  The witnesses

24.  The witnesses who gave evidence at trial and their scope of evidence are as follows[39]:-

(1)  P’s main witnesses are P and Yun Fuk whose evidence largely overlaps and covers the entire course of events in the present dispute.

(2)  P also called Mr Man Wai Lun (文偉倫) (“Wai Lun”), a nephew of the 3^rd Manager. His evidence is confined to a meeting he allegedly attended with Yun Fuk and the 3^rd Manager on 7 May 2023 where the 3^rd Manager allegedly told him and Yun Fuk that he did not agree to the Tenancy Agreements.

(3)  The evidence of D1-2 is substantially similar. They are mainly related to: (i) The past practice of KY Tso and the Managers concerning tenancy matters; (ii) the circumstances in which the alleged Oral Agreement and Tenancy Agreements were entered into; and (iii) D1-2’s accounts of the various events and meetings concerning the leasing out of the Subject Lots.

(4)  D3’s evidence is focused on the Oral Agreement and the steps he allegedly took to procure for:- (i) the removal of the trespassers of Lots 10 and 447; and (ii) the clearing and site formation of the Subject Lots by engaging Ka Shun Construction Limited (“Ka Shun”) to carry out the relevant works.

(5)  D3 also called:-

(i)  Mr Wong Wai Ming (黃偉明) (“Mr Wong”) who was interested in obtaining a sub-lease of the Subject Lots from D3. He also gave evidence on the steps he took to negotiate for the departure of the trespassers of Lots 10 and 447.

(ii)  Mr Leung Kiu Yip (梁橋葉) (“Mr Leung”), who was D3’s contact at Ka Shun. His evidence concerns his dealings with D3 and the works carried out by Ka Shun on the Subject Lots.

G.  General principles on the assessment of credibility of witnesses

25.  The determination of the present factual dispute involves an assessment of the credibility of witnesses. Useful guidance was provided by DHCJ Eugene Fung (as he then was) in Hui Cheung Fai v Daiwa Development Ltd (unreported, HCA 1734/2009, 8 April 2014) at §§77 to 83 as follows:-

(1)  Contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility.

(2)  The Court should attach importance to the inherent likelihood or unlikelihood of any event having happened, or the apparent logic of such events.

(3)  The Court may take into account the consistency of the witness’ evidence having regard to the undisputed or indisputable evidence, and the internal consistency of the witness’ evidence.

(4)  The Court should exercise care in drawing conclusions about truthfulness and reliability solely or largely from the appearance of a witness or from the assessment of a witness’ character.

(5)  Witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be paid to their motives and to the overall probabilities.

(6)  Where allegations of misconduct are made, the cogency of the evidence required to prove such allegations should commensurate with the seriousness of the allegations.

26.  Given that many of the salient events of this case took place over 8 years ago, I also take note of the caution given by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) at §§15-22[40] that human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents. Often, the best approach for a judge to adopt is to base factual findings on documentary evidence and known or probable facts and the inferences to be drawn therefrom. Witness evidence, written and oral, is not without purpose; but its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.

H.  General observations on witness evidence

27.  The credibility of various aspects of the witnesses’ evidence will be separately assessed in the following sections when I address the different issues raised. However, it is important to emphasise that the assessment of credibility is a holistic exercise. The fact that a witness’s evidence has been impeached in one aspect may affect the assessment of his credibility in another.

28.  I also remind myself that:-

(1)  Where answers given by a witness in oral examination are unsatisfactory, the court should be careful in drawing inferences that a witness is dishonest when there may be more innocuous explanations such as poor recollection.

(2)  P’s case theory involves serious allegations of misconduct against D1-3 as P alleged that they had (with the knowing assistance of Mr Wong and Mr Leung) effectively conspired together to obtain grants of tso land at discounted rents under the false pretext that Lots 10 and 447 were illegally occupied and that an Oral Agreement had been entered into.

29.  Having listened to the live evidence of the witnesses, I am not convinced that any of their evidence are both credible and reliable in their entirety for different reasons which will be explained below. Consistent with the established principles as set out above, greater importance is placed on the contemporaneous documents. Where bare allegations were made without supporting documents, such allegations were approached with caution.

I.  Adverse inference

30.  As arguments have been made regarding the failure to call other individuals to give evidence, I shall also set out below a summary of the general principles on drawing adverse inferences:-

(1)  If a party against whom a prima facie case is established fails to call an available witness, then unless there is some plausible explanation for the omission, the court is entitled (but is not obliged) to draw an adverse inference against that party.

(2)  Before a prima facie factual situation can be said to exist, there must be evidence adduced of sufficient cogency to raise a prima facie case in the first place.

(3)  The silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to produce evidence can be credibly explained, then the effect of his silence in favour of the other party may be either reduced or nullified.

(4)  Whether an adverse inference may be drawn from the absence of a witness should be a matter of ordinary rationality without making the matter overly legal or technical. So far as possible, tribunals should be free to draw, or to decline to draw, inferences from the facts of the case before them using their common sense. Whether any significance should be attached to the fact that a person has not given evidence depends entirely on the context and particular circumstances. Relevant considerations include matters such as:-

(i)  whether the witness was available to give evidence;

(ii)  what relevant evidence it is reasonable to expect the witness would have been able to give;

(iii)  what other relevant evidence there was bearing on the points on which the witness could potentially have given relevant evidence; and

(iv)  the significance of those points in the context of the case as a whole.

(5)  Where each party has produced evidence of what it said happened, the court’s obligation is to decide based upon that evidence. The court is entitled to look at the absence of evidence as part of its balancing exercise. The strength of that factor in the overall balance would depend entirely upon the circumstances, including the likelihood that the party could in fact have adduced such absent evidence and the anticipated probity of that absent evidence.

See: Hua Tyan Development v Zurich Insurance Co Ltd (2014) 17 HKCFAR 493 at §§46-47 per Ma CJ; Prest v Petrodel Resources Ltd & ors [2013] 2 AC 415 at §44 per Lord Sumption; Efobi v Royal Mail Group Ltd [2021] 1 WLR 3877 at §41 per Lord Leggatt; Feishang Non-Metal Materials Technology Ltd v Tong Chung Ming [2021] 1 HKLRD 943 at §§18-20 per Recorder Manzoni SC.

J.  Whether the TS Tso Scheme (in the terms as contended by P) or the Alleged Custom exist?

31.  In essence, P’s case is that pursuant to the Alleged Custom and the TS Tso Scheme as adopted by KY Tso, the Managers are not entitled to grant tenancies of tso land without seeking approval from the members.

32.  D1-2 denied the existence of such a requirement. It is contended that the TS Tso Scheme as adopted by KY Tso is in relation to a representative system whereby a representative was selected amongst members of the tso through a tendering system to handle renewal of tenancy[41]. The TS Tso Scheme was in no way intended to curtail the Managers’ powers. D1-2 also denied existence of the Alleged Custom.

33.  The burden of proof is on P to substantiate his contentions and it is not necessary for me to find in favour of D1-2s’ version of events.

34.  At trial, the focus of P’s counsel, Mr Ernest Koo[42], was on the TS Tso Scheme.

J1.  The evidence

35.  With respect to the terms of the TS Tso Scheme as adopted by KY Tso, the evidence of P and Yun Fuk is as follows:-

(1)  P was first appointed Duty Manager of KY Tso in 2014. In the course of carrying out his duties, he discovered deficiencies in the renting out of KY Tso’s land, eg plots were rented out to the same tenant for over 30 years without any increase in rent, and the Managers failed to enter into written lease agreements with the tenants[43].

(2)  In order to rectify the above irregularities, the 18/10/14 Meeting was held upon P’s request. The 18/10/14 Meeting was attended by members of KY Tso including P, Yun Fuk and the Managers. The tso members accepted P’s proposal to follow the TS Tso Scheme, namely, that before entering into any new tenancy agreement, the amount of rent and the terms of the agreement must be discussed and approved by members of the KY Tso[44].

(3)  From then onwards, all tenancy matters of KY Tso were handled according to the TS Tso Scheme as adopted in the 18/10/14 Meeting. After the 18/10/14 Meeting, members’ meetings were held on 18 November 2014 (“18/11/14 Meeting”) and 3 March 2015 (“3/3/15 Meeting”) whereby new leases were discussed and approved by members[45].

36.  In their evidence, D1-2 denied that under the TS Tso Scheme the Managers’ power to grant leases is subject to members’ approval:-

(1)  It has always been the practice of KY Tso that tenancy decisions were made by the Managers, usually by way of oral agreement. There has never been any requirement to obtain approval from members. In exceptional cases, the Managers might consult the elders (ie members who were aged 59 or above) for their opinion[46].

(2)  Prior to the 18/10/14 Meeting, no members’ meeting was held to discuss tenancy matters[47]. At the 18/10/14 Meeting, P proposed that KY Tso would adopt the TS Tso Scheme, namely that P would take on the responsibility for liaising with tenants and preparing written tenancy agreements in return for a one-time payment of $30,000 from KY Tso. The said proposal was approved by members at the 18/10/14 Meeting. At the same meeting, the members also agreed that another members’ meeting should be convened for discussion and determination of the rents for new tenancy[48]. As anticipated, another meeting was held on 3 March 2015 (being the 3/3/15 Meeting) to discuss and approve the new rent[49].

(3)  According to D1-2, the TS Tso Scheme was never intended to restrict the powers of tso managers. The TS Tso Scheme originated in about April 2013 in respect of four tsos/tongs (one of which was TS Tso)[50] (together, the “4 Tsos/tongs”) who had the same managers, shared common membership and often held members’ meetings together[51].

(4)  The TS Tso Scheme was adopted since April 2013. In its original form, a member would be appointed as the “Representative” (代理) to handle tenancy matters (such as liaising with tenants, preparing written tenancy agreements and rent collection) on behalf of the 4 Tsos/tongs in return for a commission (calculated as a percentage of the total rent received). The Representative was selected by way of tender whereby the bidder with the lowest proposed commission rate would be appointed the Representative[52].

(5)  At a meeting of the 4 Tsos/tongs held on 10 April 2013, P and Yun Fuk submitted a joint bid of 5% commission which was the lowest. Hence, both became the Representatives for the 4 Tsos/tongs (although the appointment was only made in the name of P)[53].

(6)  Between about 2013 to 2018, members of the 4 Tsos/tongs began to discover that P and Yun Fuk had committed certain misconduct concerning tso land[54], for example:-

(i)  They illegally occupied plots of land belonging to TS Tso in 2014 and dumped soil on those plots, resulting in warning letters from government authorities[55].

(ii)  In 2013, Yun Fuk had on his own signed a tenancy agreement for certain plots of TS Tso’s land without asking the Managers to sign. After the misconduct was discovered, Yun Fuk returned the land to TS Tso[56].

(iii)  Similarly, in 2013, P, as Representative for another tso (紹陽祖), secretly changed the identity of the tenant of Lot 644RP of Demarcation District (“DD”) 96 to himself in place of the original tenant. P tendered an apology at a members’ meeting on 17 October 2018 and the land was eventually returned to the tso to be let out to another tenant[57].

(iv)  Both P and Yun Fuk had let out Lots 277B and 289 of DD 99 registered in the name of yet another tso (廷紹堂) to a third party without obtaining approval from the managers of that tso[58].

(7)  In light of the above misconduct, certain remedial measures were adopted by members of the 4 Tsos/tongs (the “Remedial Measures”) to be implemented in the Representative system at a members’ meeting held on 26 April 2015 as follows[59]:-

(i)  The terms of any new lease must be agreed by the relevant managers and the execution of new tenancy agreements must be witnessed by a manager of the tso in question; and

(ii)  any revisions to rent should be approved at a members’ meeting.

(8)  Hence, the “TS Tso Scheme” as approved at the 18/10/14 Meeting was not intended to restrict the Managers’ power, but was only to appoint P to carry out the role of a Representative in respect of KY Tso in return for a one-time fee of $30,000, but not for a commission calculated as a percent of the rent collected. The arrangement was approved because members of KY Tso had reservations about allowing P to determine the rent in light of his previous misconduct. It also explained why the amount of rent had to be separately approved by members. The TS Tso Scheme adopted at the 18/10/14 Meeting was different from the original TS Tso Scheme (which was commission-based) and also did not include the Remedial Measures[60].

J2.  The analysis

37.  Looking at the account of P and Yun Fuk, they have been vague as to the genesis of the TS Tso Scheme, despite the subject matter forming an important part of P’s case in this regard. On the other hand, D1‑2 were able to provide a reasonably detailed account of how the TS Tso Scheme came about.

38.  More importantly, P’s case is not supported by the contemporaneous meeting minutes of the relevant meetings[61].

39.  Having perused the relevant meeting minutes of TS Tso, I am of the view that they largely corroborate with material aspects of the evidence of D1-2 on how the TS Tso Scheme was initially approved to establish the Representative system and its subsequent revisions. They also provide evidence of instances of misconduct or irregularities of P and Yun Fuk in handling tso land, which support D1-2s’ case that concerns were raised regarding the suitability of P and Yun Fuk as Representatives:-

(1)  As recorded in the minutes of TS Tso’s meeting on 10 April 2013, P and Yun Fuk were appointed as Representatives because they submitted the lowest bids, at 5% commission, in the tendering process.

(2)  According to the minutes of TS Tso’s meeting held on 8 October 2014, P and Yun Fuk had admitted to members that they in fact owned the corporate tenant of Lots 367 to 368 of DD 96, and that they had wrongfully poured soil (填泥) in those plots. They agreed to bear all responsibility for the misconduct and also promised to restore the said plots to their original condition.

(3)  Similarly, in a meeting of TS Tso held on 15 February 2015, P and Yun Fuk again admitted to illegally pouring soil in other lots[62] which resulted in a written warning from the authorities. P admitted wrongdoing and tendered an apology to the tso. P and Yun Fuk also agreed to restore those lots to their original condition and bear responsibility for any penalty levied.

(4)  At a TS Tso meeting held on 26 April 2015, it was agreed that there were defects in the Representative system and the Remedial Measures were adopted.

(5)  As recorded in the minutes of the TS Tso meeting on 17 May 2015, Yun Fuk admitted that he had secretly rented Lot 340 of DD96 and entered into the relevant lease without obtaining a manager’s signature.

(6)  According to the minutes of the meeting held on 17 October 2018, P admitted to wrongfully transferring to himself the lease of Lot 644RP that had been granted to another tenant, without obtaining authorisation.

40.  P and Yun Fuk had admitted at least some of the misconduct alleged. In P’s 2^nd Supplemental Witness Statement (“P 2^nd Supp WS”), and Yun Fuk’s Supplemental Witness Statement (“Yun Fuk Supp WS”), P and Yun Fuk admitted that they had dumped soil at TS Tso’s land. They emphasised that they had already agreed to bear all responsibility and no loss was caused to TS Tso[63].

41.  In addition, P and Yun Fuk also agreed that they had committed some of the alleged misconduct in cross-examination:-

(1)  Both P and Yun Fuk were taken to §11.1 of D1 Supp WS and admitted that they had wrongfully poured soil which resulted in a government warning.

(2)  Yun Fuk also admitted to the allegation in §11.2 of D1 Supp WS that he had secretly taken up a lease of Lot 340 of TS Tso without notifying the managers.

(3)  P admitted that, as alleged in §11.3 of D1 Supp WS, he had wrongfully changed the name of the existing tenant of Lot 644RP of DD 96 in 2013 to his own without obtaining approval from managers, although he insisted that the tso had not suffered any loss.

42.  Further, the contemporaneous records do not support P’s contention.

43.  According to the minutes of a meeting of TS Tso and Shiu Yeung Tso (紹陽祖) on 2 April 2011 (which was attended by P and Yun Fuk), it was proposed that any decision to rent out tso land could not be made by a manager personally but must be approved at a members’ meeting[64]. However, it was expressly recorded in the minutes that the resolution was not passed at that meeting, as no notice of the proposal had been given to the members[65].

44.  The above episode shows that the members of TS Tso attached great importance to the matter and, hence, the requirement that any attempt to pass such a resolution must be properly notified to the members. It also shows that there could not have been any prior resolution to the same effect; otherwise, it would not be necessary to table such a resolution at the meeting.

45.  Accordingly, it is highly unlikely that any similar resolutions to deprive the managers of the right to grant tenancy would have been passed without being recorded in clear and express wording in the minute book. Yet, no such wording appeared in any of the subsequent meeting notices or minutes of TS Tso. It was not even recorded in any of the meeting notices or minutes that such resolutions were ever proposed or discussed again.

46.  The minutes of meetings of TS Tso on 26 January 2013, 15 May 2013, 23 June 2013 and 4 April 2014 show that there were discussions regarding the rent for new tenancies of certain plots and that a resolution was passed for the appointment of a Representative[66]. In my view, it is not unusual that managers would discuss and consult members regarding tenancy matters as they are obviously part of TS Tso’s affairs. However, I do not accept that it lends any support to P’s case of the existence of a mandatory requirement that leases must be approved by members.

47.  Mr Koo placed particular reliance on the following passage from the minutes of the TS Tso meeting on 4 April 2014:-

“木勝提議租出廷士祖DD99 Lot 314 315 330，廷紹堂DD99 Lot 336作爲有機農場之用。經以往通過規矩，今晚討論租與不租 如果租，有什麽條件，通過後三星期才正式投標租出。” [67] (emphasis added).

48.  The above passage does not assist P’s case:-

(1)  There is no mention in the said minutes of what “the rules which were previously passed” (以往通過規矩) were. It is also clear from the wording that the passage was a summary of Yun Fuk’s proposal. It does not reflect a general consensus among members as to the existence of such a rule (and, if so, its terms).

(2)  In any event, as I have found above, there is no evidence that a resolution was ever passed (通過) which would require the managers of TS Tso to seek members’ approval in granting new leases. Hence, the above reference to “通過規矩” (the rules which were passed/approved) cannot be reference to the rule contended by P.

49.  I now turn to the minutes of TS Tso’s meeting on 15 May 2013. Mr Koo relied upon the following passage from the minutes:-

“如有兄弟或某他人看中祖堂某塊未出租土地，他可以先接觸司理，司理需馬上貼通告，於三星期後開會告示上列明土地面積及位置，於三星期後開會招標，以該年市價（p 83頁）農地一元一尺年租倉地三元一尺年租為最低價。投標後由司理簽出三年合約。” [68]

50.  With no disrespect, the above passage is taken out of context. It is expressly stated in the same paragraph containing the above passage that the above is subject to the qualification that a meeting shall be called in special circumstances[69]. When P and Yun Fuk were asked what was their understanding of the term “special circumstances”, both were unable to offer any real explanation. P admitted that he did not attend the said meeting whilst Yun Fuk (despite having attended the meeting) was unable to explain what amounted to special circumstances and why there was such an express requirement for holding a meeting.

51.  If there had been a mandatory and general requirement that all tenancies had to be approved by members at a meeting (as contended by P), I see no reason to expressly include such wording in the minutes that meetings should be held in special circumstances.

52.  In respect of the crucial 18/10/14 Meeting at which the resolution was passed by KY Tso to adopt the TS Tso Scheme, the wording of the relevant resolution is as follows:-

“大家同意文錦涼處理太公租務是根據廷士祖之方案進行。(一次過支付，大家同意支付三萬元正為行政費用)” [70](emphasis added).

53.  The above wording does not sit well with P’s case that the TS Tso Scheme (as adopted at the 18/10/14 Meeting) requires the grant of any new tenancy of KY Tso to be subject to members’ approval. Reading the resolution as a whole, it is clear to me that the members only approved the appointment of P as a Representative to handle tenancy matters in return for a fixed fee of $30,000, which is consistent with D1-2’s case on the meaning of the TS Tso Scheme as adopted by KY Tso.

54.  For completeness, the fact that tenancy matters were discussed and approved from time to time at members’ meetings (eg at the 8/11/14 Meeting and the 3/3/15 Meeting) does not imply that members’ approval is therefore mandatory. As I have analysed above, it is only normal for the Managers, in the course of exercising their powers, to hold meetings to consult and discuss with members matters concerning KY Tso (including tenancy matters).

55.  Accordingly, I reject P’s case that the TS Tso Scheme required the Managers to seek members’ approval before entering into leases concerning KY Tso’s land.

56.  Further, I am not satisfied that P has established the existence of the Alleged Custom whereby the Managers are required to consult and seek approval from members in relation to the grant of tenancies of tso land:-

(1)  As explained by DHCJ To in Tang Che Tai v Tang On Kwai & Ors [2007] 5 HKC 277 at §71:-

“a custom must have an obligatory force from within the custom itself which is derived from continued practice without interruption since time immemorial so that the persons in the locality whom the custom is alleged to affect must feel it an obligation to conform as if it is a norm of human behaviour or practice within that locality…”

(2)  The Alleged Custom is only the bare assertion of P and Yun Fuk. There is no corroborating evidence from other members or documentary evidence which supports the existence of the Alleged Custom. No expert evidence has been adduced as to the existence of the Alleged Custom.

(3)  Although the purported minutes of a meeting of KY Tso held on 3 June 2001, at which leases of tso land were considered, were put in evidence, this does not support P’s case on the Alleged Custom:-

(i)  As I have found above, the fact that tenancy matters were discussed from time to time at meetings does not necessarily mean that there was a mandatory requirement for members to approve leases.

(ii)  On the other hand, if the Alleged Custom existed, one would naturally expect a large number of meeting minutes where tenancy matters were discussed and approved. Even if the minutes of the meeting on 3 June 2001 were authentic, it appears to be an exception rather than the norm.

(4)  When I asked P when, to his knowledge, the Alleged Custom came into existence, P’s answer was that it had existed since time immemorial but not as a mandatory rule (應該係不嬲都有, 但係無咁規定性), but the rule was apparently in place since 2011 because of the TS Tso Scheme. This does not show the existence of the Alleged Custom:-

(i)  Even if such an alleged practice existed, as admitted by P, it was not understood to be obligatory.

(ii)  In any event, insofar as the Alleged Custom was based on the adoption of the TS Tso Scheme, I have already rejected P’s case in this regard.

(5)  P’s case regarding the Alleged Custom is also somewhat inconsistent with his own case on the terms of the TS Tso Scheme. If there had already been a traditional custom in existence that the Managers would need to obtain authorisation from members of KY Tso in order to grant tenancies, it would seem unnecessary for members of KY Tso to expressly adopt the TS Tso Scheme (which, according to P, had the same effect) at the 18/10/14 Meeting.

57.  Further and in any event, as submitted by Mr Ian Chau, counsel for D1-2, under s 15 of the NTO, the power of dealing with tso land, including the power to grant a lease, is vested in the manager (acting unanimously), and such power cannot be overridden by the decision of the members of the tso even if there existed a custom to that effect, see: Tang Kam Wah & ors v Tang Ming Yat & anor HCA10141/1998 (unreported, 26 November 2002) at §72 per Chu J (as she then was).

58.  Accordingly, I find that the Managers (as registered owners of KY Tso’s land) were entitled to enter into the Tenancy Agreements with D3 without any need to seek approval from the members of TS Tso.

K.  Whether Lots 10 and 447 were occupied by trespassers by about August 2016?

59.  In my view, this issue is closely tied to the issue of the existence of the Oral Agreement because, according to D1-2, one of their main reasons for entering into the Oral Agreement and subsequently the Tenancy Agreements was that Lots 10 and 447 were occupied by trespassers, and that it was part of the bargain with D3 that he would be granted a lease of the Subject Lots if he successfully removed the trespassers.

K1.  D1-2s’ evidence

60.  The evidence of D1-2 is as follows:-

(1)  Lot 3 was left unoccupied since late 2014[71].

(2)  Lots 10 and 447 were left unoccupied for many years and were completely surrounded by privately owned and government land. There was no public road or path allowing access to Lots 10 and 447 (unless through the surrounding private or government land)[72].

(3)  Large parts of Lots 10 and 447 were occupied by trespassers (amongst others)[73]:-

(i)  Lot 10 was occupied by a person with the surname “Yiu” who operated a logistics business at the adjacent Lot 9 by laying concrete slabs and parking trucks in Lot 10. An orange container was placed at the boundary between Lot 10 and Lot 447[74].

(ii)  About one-third of Lot 447 was used by the garage owner of Lot 448 for parking private cars and placing oil drums[75].

(4)  D3 was a business associate of D1 as they were fellow investors in a carparking business. In about July 2016, upon inquiry of D3, D1 told D3 that the Subject Lots could be leased out but Lots 10 and 447 were occupied. D3 offered to recover possession of the Subject Lots in exchange for a lease[76].

(5)  On 12 July 2016, D1 signed a letter to authorise Ka Shun and Mr Leung to carry out works to enclose Lot 3[77] (“1^st Authorisation Letter”).

(6)  On 19 July 2016, D1 received from D3 a quotation issued by Ka Shun for enclosure and levelling works for the Subject Lots in the sum of $339,300[78] (“1^st Quotation”).

(7)  In about mid-August 2016, D3 showed D1 a revised quotation from Ka Shun showing that the total costs (including the levelling/enclosure works) amounted to $488,000 (“2^nd Quotation”, together with the 1^st Quotation, the “Quotations”). Although the 2^nd Quotation was addressed to D1, it was not signed by D1[79].

(8)  In late August 2016, D1-2 (as Managers) entered into the Oral Agreement with D3 providing that, if D3 were able to (i) recover possession of Lots 10 and 447 within 6 months; and (ii) performed formation works on the Subject Lots, KY Tso would grant a lease of the Subject Lots to D3 at an annual rent of $40,200 (at $3 per square foot) for a period of 5 years[80].

(9)  On 29 August 2016, D1-2 (as Managers) signed another letter authorizing D3 to carry out clearing and land formation works in the Subject Lots (“2^nd Authorisation Letter”, together with the 1^st Authorisation Letter, the “Authorisation Letters”)[81].

(10)  In early October 2016, D3 informed D1-2 that he had reached an agreement with the trespassers to recover possession of Lots 10 and 447[82].

(11)  At the 9/10/16 Meeting[83]:-

(i)  D1-2 explained to the members that an Oral Agreement had been reached so that KY Tso would not need to incur any expenses to recover possession of and carry out works at the Subject Lots.

(ii)  It was denied that D2 told the members that, as D1 had paid for the formation and paving works of Lot 3, Lot 3 must be leased to D1.

(iii)  A vote to approve the proposed lease could not proceed due to strong objections from 3 members including P and Yun Fuk.

(12)  As D3 had carried out the land formation works in Lot 3 and recovered possession of Lots 10 and 447. In February 2017, D1-2 signed the Tenancy Agreements with D3. The formation works of Lots 10 and 447 were completed in about March 2017[84].

(13)  On about 7 June 2017, D1 and D3 (accompanied by workers) went to Lots 10 and 447 for the purpose of taking possession. They discovered that Lot 10 and part of Lot 447 were enclosed with a fence. About half an hour later, P and Yun Fuk arrived and claimed that the fence was erected by them. D3 instructed the workers to demolish the fence, which led to a conflict with P and Yun Fuk who called the police. After the arrival of the Police, D1 explained to them that he was a Manager of KY Tso, which owned Lots 10 and 447, and KY Tso did not grant any approval to P to enclose Lots 10 and 447. Thereafter, the Police took no further action[85]. I shall refer to this incident hereinafter as the “Police Incident”.

K2.  D3’s evidence

61.  D3’s evidence is largely the same as that of D1-2 on the following key events:-

(1)  the initiation of discussions concerning the potential lease of the Subject Lots[86];

(2)  the circumstances in which the Quotations and the Authorisation Letters were issued[87];

(3)  the Oral Agreement with D1-2 in about August 2016[88]; and

(4)  the signing of the Tenancy Agreements in February 2017[89].

62.  D3 also made the following additional points in his evidence:-

(1)  After inspection of the Subject Lots, he contacted his friend Mr Wong with whom he reached the following agreement (the “Sub-Lease Arrangement”)[90]:-

(i)  Mr Wong would assist D3 to negotiate with the trespassers of Lots 10 and 447.

(ii)  Mr Wong would also sub-let the Subject Lots from D3.

(2)  Both D3 and Mr Wong agreed to retain Ka Shun to carry out the relevant demolition, formation and enclosure works. Whilst D3 would be responsible for liaising with Ka Shun, Ka Shun’s fees would be paid by Mr Wong[91].

(3)  As the lease under the Tenancy Agreements expired on 28 February 2022, D3 agreed to maintain the status quo with D1-2 by continuing to occupy the Subject Lots on payment of the rent provided for in the Tenancy Agreements, so as to preserve D3’s right to exercise the Option to Renew under the Tenancy Agreements after the final determination of the present action[92].

63.  However, one aspect of D3’s account of the Police Incident was materially different from that of D1-2[93]. He claimed that the Police Incident took place in February 2017 (as opposed to June 2017, according to D1-2) when around that time he discovered that part of Lots 10 and 447 were partially enclosed with a wire fence. He was informed by the trespassers from the adjacent lots that the fence was erected by members of the Village. He also did not change his evidence despite the change of D1-2’s account in their respective supplemental witness statements.

K3.  Mr Wong’s evidence

64.  The key points of Mr Wong’s evidence are as follows:-

(1)  Since 2014, Mr Wong has owned Lots 6 and 11 of DD 98 through his corporate vehicles, which were close to Lots 10 and 447[94].

(2)  Mr Wong entered into the Sub-Lease Arrangement with D3 in about July 2016[95].

(3)  After reaching the Sub-Lease Agreement, he negotiated with the trespassers of Lots 10 and 447. It was Mr Yiu Kwok Ping[96] (姚國平) (“KP Yiu”) and his sister Yiu Sui Ying[97] (姚瑞英) (“SY Yiu”) who were in illegal occupation of Lots 10 and 447, and KP Yiu was the registered owner of adjacent Lots 7 and 9. Eventually, a settlement agreement was reached with KP Yiu and SY Yiu whereby Mr Wong paid $300,000 on or about 29 November 2017 as compensation[98]. His evidence coincides with the undisputed fact that Mr Wong’s companies acquired Lots 7 and 9 from KP Yiu for a total consideration of $5.5 million at about the same time on 27 November 2017.

(4)  In light of the present litigation, his development plans in the area were aborted and accordingly he had suffered great losses[99].

K4.  Mr Leung’s evidence

65.  The last witness called by D3 was Mr Leung:-

(1)  Mr Leung had a business relationship with D3 and Mr Wong for over 10 years. He provided the 1^st Quotation to D3 on 19 July 2016 and subsequently the 2^nd Quotation on 16 August 2016, due to a change in the scope of the work[100].

(2)  Ka Shun began to carry out the formation and enclosure works on Lot 3 in about September 2016 and completed the works on or about 20 October 2016[101].

(3)  Concerning the Police Incident, Mr Leung originally claimed that it took place in February 2017[102]. However, during cross-examination, he accepted that it in fact occurred on 7 June 2017 because he was not at the site when the police arrived.

(4)  Payments for the work done by Ka Shun were made as follows:-

(i)  D3 paid the first instalment in the sum of $150,000 to him on 20 October 2016[103].

(ii)  After negotiation, Mr Leung agreed to reduce the contract sum to the amount set out in the 1^st Quotation (ie $339,300). He received the balance of the contract sum from D3 on 16 March 2017[104].

(iii)  The above payments were evidenced by Receipts issued by Ka Shun addressed to D3 (the “Receipts”).

K5.  P and Yun Fuk’s evidence

66.  In summary, the evidence of P and Yun Fuk is as follows:-

(1)  As at about August/September 2016, Lots 10 and 447 had been left vacant for a long time without being let to any tenant[105]. As Lots 10 and 447 were not entirely enclosed by a fence, the logistics business operated by a Mr Yiu Kwok Leung[106] (姚國良) (“KL Yiu”)) in the adjacent Lots 7 and 9 (the “Logistics Business”) had from time to time occupied a small part of Lot 447 and had also parked vehicles in Lot 10.

(2)  At the 9/10/16 Meeting, D1-2 proposed that Lot 3 should be let to D1 and no one else could rent the land, as he had paid for the land-levelling work on Lot 3. They tried to force a vote to approve the proposal, but the attempt was thwarted by P so no resolution was passed[107].

(3)  Sometime after the 9/10/16 Meeting, P requested KL Yiu to stop trespassing on Lots 10 and 447. To prevent further trespassing, he also erected fences to enclose Lots 10 and 447 on or about 18 February 2017[108].

(4)  On 7 June 2017, P and Yun Fuk discovered that the wire fence enclosing Lots 10 and 447 erected by P was cut and the concrete slabs on Lot 10 were dug up, apparently by workers accompanied by D1 and D3. D3 showed P copies of the Tenancy Agreements and claimed that he was the tenant of the Subject Lots. P also made a police statement on 8 June 2017[109].

(5)  P subsequently liaised with KL Yiu who informed P that [110]:-

(i)  Lots 7 and 9 were acquired by KP Yiu for investment purposes in July 2016. The said lots were sold by KP Yiu to Mr Wong in November 2017.

(ii)  There was never any issue of illegal occupation of Lots 10 and 447.

(iii)  There was never any discussion between KP Yiu and Mr Wong or D3 regarding the alleged illegal occupation, nor was there any settlement.

(iv)  The settlement arrangement alleged by Mr Wong was a lie. The $300,000 payment from Mr Wong to KP Yiu was for acquiring Lots 7 and 9.

(v)  Mr Wong had repeatedly threatened KP Yiu to sell Lots 7 and 9 to Mr Wong’s companies because Mr Wong and D3 wished to acquire Lots 10 and 447 which, together with adjacent lots, would enable them to build a large warehouse capable of generating substantial profit.

(vi)  The above matters were within KL Yiu’s personal knowledge or were communicated to him by KP Yiu. However, KL Yiu declined to give evidence in this case for personal reasons.

K6.  Analysis

67.  Regrettably, the state of evidence on the issue of illegal occupation is unsatisfactory. The court is also not assisted by expert evidence, such as surveyor’s reports, and there are no aerial photographs showing the actual condition of Lots 10 and 447 at various points in time.

68.  The maps and plans submitted by the parties are not per se dispositive of the issue because they do not directly show the condition of Lots 10 and 447 as at around August 2016. In particular:-

(1)  The survey sheets dated 9 April 2015 and 13 December 2016 do not show the boundaries of the various lots in question.

(2)  The Lot Index Plan[111] only showed the condition of the land in 2014[112]. Nevertheless, it showed a fence which was erected along the boundary of Lot 448 had extended into a portion of Lot 447. This supports D1‑2’s case that illegal occupation had begun even before 2016 and contradicts P’s case that there had never been any illegal occupation until late 2016. It is also reasonably clear from the Lot Index Plan that there was no independent road access to Lots 10 and 447.

69.  Similarly, the various sets of photos of Lots 10 and 447 submitted by the parties are not conclusive. They consist of the following:-

(1)  P had taken a set of 4 photos showing parts of Lots 10 and 447 and also their adjacent lots on 18 February 2017. These photos (“P’s Photos”) were enclosed to the 8/3/17 Letter from CMKI which were explained by P in his evidence:-

(i)  Vehicles including private cars and heavy trucks were found parked on Lot 448.

(ii)  The paved concrete floor of Lot 448 had extended to Lot 447.

(iii)  Part of Lot 10 was enclosed by a wire fence erected by P, who also affixed warning signs containing the words “祖堂物業，請勿濫用” to the wire fence.

(iv)  Large concrete slabs were placed on Lot 10.

(2)  Photos of the Subject Lots were also taken by D3 (“D3’s Photos”).[113] According to his oral evidence, some of those photos were taken in around June 2016 and the rest were taken in 2017.

(3)  Three photos were taken at a joint site inspection on 17 July 2020 attended by the parties’ solicitors (“2020 Photos”). They appear to show that a 2-storey high building and a gate were built in Lots 10 and 447. Both the building and the gate were apparently built after D3 had taken possession of Lots 10 and 447.

70.  The photos submitted are of limited assistance and cannot by themselves amount to definitive proof one way or another:-

(1)  In each case, the photos (which are of varying degrees of quality) do not clearly show the orientation and status of Lots 10 and 447, the exact boundaries of the relevant Lots or the locations of various structures and items.

(2)  The photos also do not appear to show a full picture of the entirety of Lots 10 and 447.

(3)  More importantly, I am not convinced that any of the photos were taken at the material time of around August 2016:-

(i)  P’s Photos were taken about 6 months after August 2016. A fortiori, the 2020 Photos cannot shed any light on the state of illegal occupation in 2016.

(ii)  Although D3 claimed that some of D3’s Photos of Lots 10 and 447 were taken in 2016, I do not accept that this is the case. There is no objective corroborating evidence (eg time stamps of the photos) and this explanation was only given for the first time by him in oral evidence. There was no suggestion by him in his witness statements that he had taken photos when inspecting the Subject Lots in July 2016[114]. The only part of his witness statements in which he claimed to have taken photos was around the time of the Police Incident, which he claimed happened in February 2017[115].

71.  Further, for the reasons set out below, I have reservations about the credibility and/or reliability of the evidence of the witnesses.

72.  After hearing P’s oral testimony, I am unable to accept his evidence without hesitation:-

(1)  P’s case theory is that D1-2 had conspired together to take over the Subject Lots without observing the requirement to obtain members’ approval in accordance with the TS Tso Scheme and the Alleged Custom. The alleged fabrication of the illegal occupation of Lots 10 and 447 was a material part of the conspiracy[116].

(2)  I am not persuaded that P was giving the court a complete picture of his knowledge concerning the status of Lots 10 and 447:-

(i)  In his witness statements, P’s portrayal was that there was no illegal occupation as the trespass into Lots 10 and 447, which involved parking of vehicles, was only temporary in nature and of a limited extent[117].

(ii)  After P was shown D3’s Photos, he accepted that: (i) the occupiers of Lot 448 had in fact extended the concrete pavement into Lot 447[118]; and (ii) the concrete slabs in Lot 9 had extended into Lot 10.

(iii)  These matters are obviously material. They indicate that the trespass into Lots 10 and 447 were more permanent and substantial than what was originally suggested by P to be the case.

(iv)  Yet, despite having given detailed observations on D3’s Photos in his witness statement[119], P omitted to mention these important features, which is striking given his claim that he had the assistance of a surveyor after discovering the unauthorized parking of vehicles.

(3)  I also do not accept P’s bare assertions about what KL Yiu told him regarding KP Yiu’s dealings with Mr Wong[120] as reliable or sufficiently cogent, especially where they involve serious allegations that Mr Wong exercised duress and repeatedly threatened KP Yiu:-

(i)  In cross-examination, P was unsure about the precise relationship between KL Yiu and KP Yiu but speculated that they may be brothers. He also admitted that he did not know KP Yiu or SY Yiu.

(ii)  Even on P’s own evidence, there was no suggestion that KL Yiu was personally involved in the negotiations. At least part of P’s evidence regarding the alleged dealings between KP Yiu and Mr Wong, as relayed by KL Yiu to P, amounts to double hearsay[121].

(iii)  P’s claim that KL Yiu said that the $300,000 was paid by Mr Wong to KP Yiu to acquire Lots 7 and 9 appears to be inaccurate. According to the land registry searches, the total consideration for the acquisition was $5.5 million.

(iv)  I also find P’s allegation that Mr Wong repeatedly threatened KP Yiu to be vague and unparticularised. There is no evidence that the terms of Mr Wong’s purchase of Lots 7 and 9 from KP Yiu were unfair or unusual. According to the land registry records, KP Yiu acquired Lots 7 and 9 in about June 2016 from its previous owner at a consideration of $4,000,000. Hence, he made a profit of about $1.5 million in less than 1.5 years. On its face, the sale to Mr Wong appeared to be highly profitable to KP Yiu.

73.  Yun Fuk’s evidence in cross-examination is unhelpful:-

(1)  At first, he was certain that the Subject Lots were never occupied and claimed that this was known to him because he had been told by P and had also personally inspected the Subject Lots. However, he was unable to recall any details, including the date of such alleged inspections.

(2)  When he was later asked about trespassers who parked vehicles and placed containers in Lots 10 and 447 before February 2017, his response was that he did not have a clear picture (我唔清楚).

(3)  He was also unable to recall the features and condition of Lots 10 and 447.

74.  On the other hand, I also have reservations about the reliability of the evidence of D1-2:-

(1)  As pointed out by Mr Koo, there is a substantial similarity in wording between the witness statements of D1-2. I am mindful that their witness statements were prepared by the same legal team, hence it was not unlikely that there was contamination of the witnesses’ memory and recollection.

(2)  Neither D1 nor D2 was able to provide a detailed explanation as to the extent of the illegal occupation from their own memory. They were unable to recall the timing and sequence of the various events with precision.

(3)  Several of their assertions about the illegal occupation of Lots 10 and 447 are not supported by D3’s Photos, despite their claims. By way of example, I am not persuaded that those photos demonstrated that Lot 10 was used for parking or that cargo containers and oil drums were placed on Lot 447[122]. However, I also bear in mind that the condition of Lots 10 and 447 may not be static. Objects such as cargo containers, oil drums and vehicles can be moved around and in or out of Lots 10 and 447 from time to time.

75.  Notwithstanding the above, I do not accept the submission of Mr Koo that D1-2 were dishonest, which are serious allegations:-

(1)  Both D1-2 are elderly. With no disrespect intended, they also did not appear to be sophisticated, nor did they articulate themselves clearly and precisely. At times, it appeared to me that they were confused by the questions put to them in cross-examination.

(2)  I am not persuaded that there is sufficient evidence for me to rule that D1-2 had attempted to deceive the court. The more likely explanation for their unsatisfactory evidence is poor recollection and contamination of memory.

(3)  Given the support that D1-2 were able to gather from the majority of the members who attended the 9/10/16 Meeting[123], I do not see any convincing reason for D1‑2 to devise a complicated scheme involving various fabrications to take over the Subject Lot with the involvement of D3 (who is an outsider of the Village), Mr Wong and Mr Leung.

76.  In respect of D3’s oral evidence:-

(1)  When he was presented with D3’s Photos, which do not appear to demonstrate that Lots 10 and 447 were illegally occupied:-

(i)  He readily admitted that he had not taken care to record the state of the illegal occupation, as he did not anticipate litigation at the time D3’s Photos were taken.

(ii)  As explained above, it is doubtful whether any of D3’s Photos were in fact taken around June to July 2016 as claimed.

(2)  His recollection of the details of the events concerning the recovery of possession of Lots 10 and 447 was also vague and imprecise, eg:-

(i)  As I have highlighted above, whilst he claimed in §19 of his witness statement that the Police Incident took place in about February 2017, in his oral evidence, he admitted that it was likely to have taken place on 7 June 2017.

(ii)  He was also unable to provide a detailed explanation of how he managed to negotiate with the occupier of Lot 448 who trespassed upon Lot 447.

(3)  D3 was also unsure about the precise locations of the various objects and structures in D3’s Photos (eg whether these objects/structures were in fact located within Lots 10 and 447) due to lapse of time. He also admitted that he did not engage a surveyor.

(4)  Notwithstanding the above, I am not satisfied that D3 was colluding with D1-2 to deceive the court or that he was dishonest:-

(i)  In assessing his evidence, I have taken into account the fact that he had business dealings with D1-2. As detailed above, he readily acknowledged that he was careless and could not provide a clear account.

(ii)  As I have found above, and as admitted by D3 in cross-examination, the Police Incident took place on 7 June 2017. If D3 had in fact colluded with D1-2, then it was likely that he would have followed suit to change his evidence to match the account of D1-2, when they changed their evidence on the timing of the Police Incident in their supplemental witness statements on 3 May 2021[124].

77.  Insofar as Mr Wong’s evidence was concerned:-

(1)  The following aspects of Mr Wong’s evidence have not been seriously challenged or impeached:-

(i)  Throughout the years, he had been acquiring land around Lots 10 and 447:-

(i)  His companies acquired Lots 6 and 11 in November 2014.

(ii)  He had entered into the Sub-Lease Arrangement with D3.

(ii)  The above supports his account that he had plans to unify Lots 10, 447 and the surrounding lots to build warehouse facilities, especially considering also his acquisition of Lots 7 and 9 in November 2017.

(iii)  He has remained in occupation of Lots 7, 9 10 and 447 to date.

(iv)  His plans did not materialize despite his investment, partially due to the present proceedings and also because of the subsequent government proposal dated 1 March 2024 to resume Lots 7, 9 10 and 447.

(2)  I do not consider Mr Wong to be a dishonest witness:-

(i)  Given the passage of time, it is not unreasonable to expect that Mr Wong’s recollection of the details and timing of the negotiations would have faded.

(ii)  As Mr Wong’s development plans for Lots 10 and 447 did not materialise, it is unlikely that Mr Wong, who is not a party to this litigation, stands to gain much from the outcome of the present action.

(iii)  In any event, I do not accept Mr Koo’s submissions that it was incredible for Mr Wong to negotiate with KP Yiu and SY Yiu but not KL Yiu (who was operating the Logistics Business at Lots 7 and 9 and the alleged trespasser). If Mr Wong was successful in acquiring possession of Lots 7 and 9 from KP Yiu (who was the registered owner), the Logistics Business could no longer remain in Lots 7 and 9, then naturally there could not be any possibility for the Logistics Business to encroach upon Lot 10 and/or 447 from Lots 7 and 9.

(iv)  I also do not find Mr Wong’s oral evidence that he had to travel to Dongguan to negotiate with KP Yiu to be inherently incredible. As shown by the assignments of Lots 7 and 9 to Mr Wong’s companies dated 27 November 2017, KP Yiu’s address was stated to be in Dongguan.

(v)  Finally, the criticism that Mr Wong had not expressly mentioned his acquisition of Lots 7 and 9 in his witness statement is unjustified, as these transactions are plainly a matter of public record and clearly support his evidence that he had development plans for the area.

(3)  Importantly, I accept Mr Wong’s evidence that he had paid compensation to SY Yiu through the bank account of KP Yiu as it is supported by (i) a cheque for $300,000 with KP Yiu as the payee but signed by SY Yiu on 27 November 2017; and (ii) bank statements showing the cheque payment. As SY Yiu was not the owner of Lots 7 and 9, the only reason for Mr Wong to pay SY Yiu was to secure her exit.

(4)  However, the payment of compensation to SY Yiu is consistent with, but does not necessarily support, the case that she was in illegal occupation of Lots 10 or 447, as the compensation could simply be paid for the sole purpose of ensuring her departure from Lots 7 and/or 9.

(5)  Hence, notwithstanding the above, Mr Wong’s evidence is of limited value for the purpose of determining the issue of whether there was in fact any illegal occupation at the material time. There was little if any description in his witness statement as to the extent of the illegal occupation. The topic was also not explored in any detail in his oral evidence.

78.  As for Mr Leung, the focus of his evidence was his dealings with D3 and the work that Ka Shun carried out at the Subject Lots:-

(1)  I consider him to be an honest witness who made a real effort to inform the court of his involvement in the matter. However, given the lapse of time, his recollection of the timing and the details of the relevant events was imprecise, eg his recollection of the Police Incident was unreliable:-

(i)  As I have found above, the Police Incident likely took place on 7 June 2017 and not in February 2017.

(ii)  As admitted by Mr Leung in cross-examination, he had left the site before the arrival of the police.

(2)  Little was said in his witness statement regarding the extent of the illegal occupation. In cross-examination, he admitted that his recollection of the state of Lots 10 and 447 was not clear.

(3)  Nevertheless, despite his poor recollection of how the work items in the Quotations were carried out and the period during which those works were performed, I am satisfied that the Quotations and the receipts evidencing payments by D3 (the “Receipts”) were contemporaneous records:-

(i)  It is not disputed that various works were carried out by Ka Shun on the Subject Lots. Naturally, Ka Shun would be remunerated.

(ii)  Both Quotations were expressly stated to be in relation to works carried out for each of the Subject Lots. This supports the evidence of D1, D2 and D3 that it was envisaged from the beginning that works would be required for all 3 of the Subject Lots. The carrying out of works on Lots 10 and 447 was not an afterthought.

(iii)  I cannot see any reason for Mr Leung to go to the trouble of fabricating two separate sets of quotations and receipts if those documents were created after the event.

(4)  The Quotations and Receipts also support D3’s evidence that he paid Ka Shun for carrying out the works[125].

79.  Mr Chau, counsel for D1-2, relied heavily on a warning letter dated 17 January 2018 issued by the Rating and Valuation Department (“RVD”) which stated that the rates for Lots 7, 8, 9 and 10 were assessed together for the periods of 1 April 2014 to 31 March 2015, 1 October 2015 to 31 December 2015 and 1 January 2016 to 10 March 2016.

80.  As provided under s 21(1) of the Ratings Ordinance (Cap 116), the owner and occupier of a tenement shall both be liable for payment of rates. Hence, Mr Chau argued that, since KY Tso was only the registered owner of Lot 10, RVD must have regarded the said 4 lots (which included Lot 10) as being occupied by a common occupier. In turn, this demonstrated that Lot 10 was occupied.

81.  Although the fact that Lots 7 to 10 were assessed together for rates purposes is consistent with the defendant’s case of illegal occupation, in the absence of any explanation from RVD as to the reason for the assessment, I am not satisfied that this piece of evidence alone amounts to compelling evidence of illegal occupation of Lot 10.

82.  In view of the limitations identified above, I find the following matters, which are common ground or not seriously disputed, to be a useful starting point of the analysis:-

(1)  Lots 7 and 9, which were adjacent to Lot 10 and Lot 447, were occupied by KL Yiu and SY Yiu and used by KL Yiu for the Logistics Business, even though KP Yiu was the registered owner.

(2)  It is not the situation where there was never any illegal trespass of Lots 10 and 447 as at about August 2016[126], but the dispute is on the extent and degree of the trespass. Even on P’s evidence, he noticed that small areas of Lot 447 were occupied and vehicles of the Logistics Business were sometimes parked in Lot 10[127], and he admitted in cross-examination that the concrete pavement from Lot 448 had extended into Lot 447.

(3)  Large concrete slabs had extended from Lot 9 into at least a part[128] of Lot 10[129].

(4)  (1) and (3) above are consistent with the evidence of D1-2 that the Logistics Business of Lots 7 & 9 had encroached upon Lot 10, as the concrete slabs were placed to enable heavy trucks to be parked on Lot 10[130].

83.  In my judgment, the discussion at the 9/10/16 Meeting is crucial to determining whether there was any illegal occupation:-

(1)  The Village is an indigenous village in the New Territories and not an urban area with high rise buildings. Members of KY Tso also belong to the same extended family. It is inherently unlikely that any illegal occupation of Lots 10 and 447 in 2016 (or before) would have escaped the attention of the members of KY Tso who resided in the Village. There is also no suggestion from P or D1-2 that they had encountered any difficulty in finding out about the status of Lots 10 and 447 at the material time. In other words, it is likely that at least some members of KY Tso who resided in the Village would know whether there was any illegal occupation of Lots 10 and 447.

(2)  D1-2 have produced confirmations signed by 20[131] out of about 32[132] members of KY Tso who attended the 9/10/16 Meeting (the “9/10/16 Meeting Confirmations”).

(3)  18 of the signatories of the 9/10/16 Meeting Confirmations stated their residential addresses to be within the Village. Therefore, it is reasonable to expect that the occupation status of the Subject Lots was within the personal knowledge of at least some, if not all of these signatories.

(4)  As stated in the 9/10/16 Meeting Confirmations:-

“…2016年10月09日（星期日）在村公所出席當時由司理人召開的會議，商量丈量約份98地段第3號地段和第10號地段及丈量約份96地段第447號地段(“該地段”)的出租事宜，本人當時知道，同意及理解大部分出席子孫均表示同意，將該土地租予協助祖堂回收土地的人士，但由於文錦涼、文錦平和文木勝持相反意見及强烈返[sic]對進行投票，所以該會議沒有進行正式表決和議決記錄” [133] (emphasis added).

(5)  In my view, the wording in emphasis above shows that the signatories were clearly aware of the illegal occupation of Lots 10 and 447 at the time, and thus there was a need to recover possession. It must be for this very reason that they also agreed to let the Subject Lots to the party who could assist KY Tso in successfully recovering possession of Lots 10 and 447[134].

(6)  It is highly unlikely that all the signatories to the 9/10/16 Meeting Confirmations (which constituted a majority of KY Tso members who attended the 9/10/16 Meeting) would knowingly sign confirmations containing false statements. One of the signatories was Mr Man Kin Hon[135] (文堅漢) who, according to the oral evidence of P and Yun Fuk, was a representative of the Village (村代表) and also the member entrusted by KY Tso with the task of taking the minutes of the meeting.

(7)  There is no corroborating evidence from other attendees to support P’s account of the discussion at the 9/10/16 Meeting.

(8)  In his 3^rd Supplemental Witness Statement (“P 3^rd Supp WS”)[136] and in his oral evidence, P alleged that the 9/10/16 Meeting Confirmations were signed under the influence of D1-2. He also pointed to family or business connections between some of the signatories. I reject these assertions for the following reasons:-

(i)  There is no express allegation by P that the signatories knowingly signed a false statement or affirmed matters known to be false.

(ii)  The allegation is merely P’s personal belief, which is speculative and not properly grounded in evidence, particularly given its seriousness. By definition, members of a tso belong to the same extended family, it is therefore unsurprising that they are connected to one another in various ways.

(iii)  When the 9/10/16 Meeting Confirmations were put to P in cross-examination, P initially stated that he was unable to offer any explanation. Upon being asked whether he had approached the signatories, P said that he had not approached most of them because they were from the opposing camp. P had only approached Mr Man Sun Wah[137] (文新華), who allegedly told P that he did not know why he had signed the confirmation. I do not accept this evidence as credible because:-

(i)  P’s account of his contact with Sun Wah was raised for the first time in these proceedings.

(ii)  Man Sun Wah was expressly mentioned by P in his witness statement[138]. Given the importance of the matter, it is surprising that this episode was omitted from his witness statements. P has failed to provide any explanation for the omission.

84.  I also do not accept that any adverse inference should be drawn against D1-2 for not calling the signatories to give evidence. As ordered by Master Ho on 3 April 2023, the affirmations filed by D1-2 (which include the affirmations of the signatories of the 9/10/16 Meeting Confirmations) were to stand as evidence-in-chief in this trial. Insofar as P wished to dispute this evidence, it was open to him to subpoena the signatories for cross-examination.

85.  According to P’s account of the 9/10/16 Meeting, the only discussions at the meeting was about Lot 3 and there was no mention of any discussion concerning Lots 10 and 447[139].

86.  In Yun Fuk’s witness statement, he appeared to accept that Lots 10 and 447 were also discussed at the 9/10/16 Meeting. However, there was no mention what those discussions were[140].

87.  In his oral evidence, Yun Fuk said the following:-

(1)  In cross-examination, Yun Fuk was taken to D1’s witness statement (at §53 which showed his version of the discussions at the 9/10/16 Meeting). At that point, he accepted that D1 had said at the meeting that Lots 10 and 447 were illegally occupied.

(2)  In re-examination, when Yun Fuk was asked to describe what happened at the 9/10/16 Meeting, he then said that the proposal that night was to lease out all 3 Subject Lots to a third party (which could be D3[141]). However, “everyone” at the meeting was opposed to the proposal (“個個都唔贊成”).

88.  I do not accept Yun Fuk’s evidence that everyone at the 9/10/16 Meeting was opposed to the proposal to rent the Subject Lots to D3 in light of my analysis above. However, it is significant that he admitted that the issue of illegal occupation of Lots 10 and 447 and the possibility of renting the Subject Lots to a third party were expressly discussed at the time.

89.  I also reject P’s oral evidence that Lots 10 and 447 were not discussed at all at the 9/10/16 Meeting, and hence that no mention was made of any illegal occupation):-

(1)  According to P, the only proposal advanced by D1-2 was that Lot 3 should be leased to D1, because D1 had carried out the formation works of Lot 3. This account is contradicted by Yun Fuk’s oral evidence.

(2)  It is also unlikely that Lots 10 and 447 were not discussed at the said meeting, as it is clear from the notice of meeting dated 1 October 2016 and the minutes of the 9/10/16 Meeting that the very purpose of calling the said meeting was to discuss the Subject Lots (which included Lots 10 and 447).

90.  Having considered the evidence as a whole, and for the reasons set out above, I find that substantial parts of Lot 447 and at least part of Lot 10 were illegally occupied in or around late August 2016, when the Oral Agreement was said to have been concluded.

L.  Whether the Oral Agreement was reached in or about August 2016?

L1.  Existence of the Oral Agreement

91.  P contends that the Oral Agreement was fabricated by D1-2, who acted in concert with D3 to avoid presenting the matter to the members of KY Tso and thereby secure the best available rent for the Subject Lots. This is a serious allegation.

92.  This narrative does not sit well with my findings above that:-

(1)  There was no custom or rule passed by the members of KY Tso which requires members’ approval of leases.

(2)  Lots 10 and 447 were occupied by trespassers in or around August 2016.

93.  Again, in my judgment, the most significant evidence is the discussion at the 9/10/16 Meeting. I am satisfied that the Oral Agreement was in fact raised and discussed at the said meeting, contrary to the allegation of P for the reasons discussed in the previous section.

94.  First and most importantly, as I have analysed in §§83-89 above, the 9/10/16 Meeting Confirmations affirmed that the gist of the Oral Agreement (ie to lease the Subject Lots to the party who successfully recovered possession from the trespassers) was expressly discussed at the 9/10/16 Meeting.

95.  Second, Yun Fuk had in fact admitted also that the substance of the bargain underlying the Oral Agreement was discussed at the 9/10/16 Meeting, even though he insisted that the Oral Agreement did not exist.

96.  In my view, Ds’ case that the Oral Agreement was entered into in or around August 2016 is also consistent with the undisputed fact that formation and enclosure works were carried out at Lot 3 at about the same time[142]. As shown by the Quotations and the Receipts, those works were carried out by Ka Shun at the behest of D3.

97.  As a matter of commercial sense, there was no reason for D3 to expend effort in carrying out these works unless the Oral Agreement was already in place with D1-2. This also explains why D1 signed the 1^st Authorisation Letter authorising Ka Shun and Mr Leung to carry out works at Lot 3, as well as the timing of the Quotations provided on 19 July 2016 and 16 August 2016, a few weeks apart.

98.  I also do not accept Mr Koo’s criticism of the Ds for not recording the Oral Agreement in writing:-

(1)  D1-2 do not appear to be highly sophisticated, nor do they appear to routinely require transactions or affairs related to KY Tso to be recorded in meticulous detail[143]. The tenancy agreements customarily used by KY Tso and signed by them were in a simple form.

(2)  Given that D1 and D2 had known D3 for a long period of time, it is also not inherently incredible that the Oral Agreement and the related discussions were not reduced to writing.

99.  I also cannot see why there was any real need for the Authorisation Letters to refer to the Oral Agreement. As explained by D3, the purpose of the Authorisation Letters was to demonstrate to third parties that D3, Ka Shun and Mr Leung were authorised to enter into and carry out works in the Subject Lots[144].

100.  Accordingly, I find on a balance of probability in favour of the defendants’ case that the Oral Agreement was concluded in or about August 2016.

L2.  Whether the Oral Agreement was legally binding?

101.  I also find that the Oral Agreement was legally binding (subject to the issue of the 3^rd Manager’s consent which is considered in Section N below).

102.  First, as submitted by Mr Chau for D1-2, the terms of the Oral Agreement were sufficiently certain as all the essential terms, namely, the rent, the length of the lease and the conditions precedent for commencement of the lease were agreed.

103.  Second, even though the Oral Agreement was not evidenced in writing, on the facts as found by me, the agreement is valid by reason of part performance.

104.  Generally, an agreement for disposition of land must be in writing and signed by the parties, see: s 3(1) of the Conveyancing and Property Ordinance (Cap 219). However, the rule does not affect the law relating to part performance, see: s 3(2).

105.  The test is whether all the acts relied on as party performance were unequivocally referable to the contract relied upon such that specific performance of the oral agreement should be granted, see: Ng Yuk Pui Kelly v Ng Lai Ling Winnie (2021) 24 HKCFAR 401 at §§14-16 per Ribeiro PJ; Lam Ngok Ching v Tsang Yuk Ming HCA 1192/2004 (unreported, 8 June 2006) at §§35-38 per Suffiad J.

106.  Acts done in relation to construction on or improvement of the premises, obtaining of occupation permits, and acts done in anticipation of occupation can amount to acts of part performance, see: Chan Yat v Fung Keong Rubber Manufactory Ltd [1967] HKLR 364 at 402 per Pickering J.

107.  In my view, the test was clearly satisfied in light of my findings above on D3’s acts. He had procured (i) the formation works to be carried out on Lot 3; and (ii) the eviction of the trespassers of Lots 10 and 447. In my view, such acts, which are all related to gaining possession and making improvement of the Subject Lots, can only be referable to the existence of the Oral Agreement.

M.  Whether D3 had satisfied the conditions precedent to entering the Tenancy Agreements?

108.  Mr Koo also argued that, as it was P who recovered possession of Lots 10 and 447 by erecting the fence in February 2017, there was no justification for D1-2 to rent the Subject Lots to D3 at a discounted rate.

109.  With respect, I disagree.

110.  First, it is not inconceivable that P, D3 and Mr Wong had all taken steps to negotiate with trespassers. If anything, the evidence of D3 and Mr Wong that they had reached preliminary agreement with the trespassers by around late 2016 could readily explain why P seemed to able to secure the cooperation of the trespassers and erect the fences to enclose Lots 10 and 447 with relative ease. There is no suggestion from P that he had to pay any compensation to the trespassers.

111.  Second, as submitted by Mr Chau, the steps taken by P were by no means a complete solution, as there was no guarantee that KL Yiu and SY Yiu would continue to comply with P’s demand as long as they remained in Lots 7 and 9. As I have found above, D3 had procured Mr Wong to: (1) acquire Lots 7 and 9 from KP Yiu where (a) the Logistics Business was operated on; and (b) KL Yiu and SY Yiu was said to have occupied; and (2) pay compensation to SY Yiu to secure her departure.

112.  By doing so, D3 had practically removed the source of the illegal trespass and hence eliminated any risk of future trespass.

113.  Third, the removal of trespassers is not only part of the bargain for obtaining discounted rent. D3 also had (among other things) carried out the formation and levelling works on the Subject Lots. As reflected by the Quotations[145] and as a matter of common sense, the costs of these construction works cannot be trifling.

114.  I also reject P’s argument that the Quotations were not related to Lots 10 and 447.

(1)  As I have found above, I am not satisfied on the evidence that the Quotations were fabricated. Both Quotations expressly refer to each of the Subject Lots.

(2)  This argument is contrary to the express wording of items 8 and 9 of the 2^nd Quotation which expressly referred to clearing and formation works for Lots 10 and 447.

(3)  It is also undisputed that those works were in fact carried out, as P had admitted to the formation and enclosure of Lot 3. He also witnessed D3’s workers carrying out such works on Lots 10 and 447 on 7 June 2017 which led to the Police Incident.

(4)  I also reject Mr Koo’s criticism that Ka Shun was not expressly named in the 2^nd Authorisation Letter as being authorised to enter into Lots 10 and 447. As D3 was named as the person authorised by D1-2 (in their capacity as managers) and Ka Shun was engaged by the D3 as its contractor, Ka Shun obviously had authority to carry out the relevant works.

N.  Whether the 3^rd Manager consented to the grant of tenancy to D3?

115.  It is not disputed that consent of all 3 of the Managers was required for the grant of tenancy to D3. In the absence of the signature of the 3^rd Manager on the Tenancy Agreements, Ds rely upon the following to show that the D1-2 had actual authority from the 3^rd Manager: (1) the 3^rd Manager had impliedly or by conduct delegated his power to D1-2; and (2) by voting in support of the resolutions to use the funds of KY Tso to pay for D1-2’s legal fees, the 3^rd Manager had expressed his consent to the grant of tenancy to D3.

116.  Regardless of whether the 3^rd Manager’s discretionary power to grant tenancies could be delegated to D1-2, I agree with the submissions of Mr Chau that the 3^rd Manager had given his consent, as evidenced by his stance in openly supporting (together with other members of KY Tso) the resolutions to use KY Tso’s funds to pay for D1-2’s legal costs.

117.  First, I am satisfied that the 3^rd Manager was kept informed of all the pertinent issues and developments concerning the Subject Lots since (by latest) the 9/10/16 Meeting:-

(1)  As I have found above, the terms of the Oral Agreement and the issue of illegal occupation of Lots 10 and 447 were discussed at the 9/10/16 Meeting, which was attended by the 3^rd Manager.

(2)  P’s demands and allegations as set out in CMKI’s 15/10/16 Letter, 8/3/17 Letter and 31/5/17 Letter were sent also to the 3^rd Manager. In those letters, the question of the Managers’ authority to grant tenancies of tso land was expressly raised.

(3)  At the 22/10/16 Meeting held to discuss the 15/10/16 Letter, which was called by all 3 Managers, the 3^rd Manager, together with a majority of the attending members of KY Tso, passed a resolution that KY Tso shall pay for all further legal expenses incurred by the Managers to respond to further legal correspondence from any villagers.

(4)  The First Offer and Second Offer made by Yun Fuk on 27 October 2016 and on 29 March 2017 respectively were addressed to all 3 of the Managers.

(5)  After the present action was commenced by P on 7 August 2017, importantly, the notice of the 25/10/17 Meeting, issued by all 3 Managers expressly referred to the lease of the Subject Lots by D1-2 to D3 and the present action brought by P.

(6)  The said 25/10/17 Meeting was attended by about 40 members, including each of the Managers, P and Yun Fuk.

(7)  One of the key allegations raised by P in the present action is that D1-2 granted a lease of the Subject Lots to D3 without the consent of the 3^rd Manager. Given the purpose of the 25/10/17 Meeting, those allegations would have been raised and discussed by the members at the 25/10/17 Meeting in considering whether KY Tso should fund the legal costs of D1-2 in the present action.

(8)  There is no evidence of any objection raised by the 3^rd Manager at the 25/10/17 Meeting that he was not informed of the Oral Agreement or the Tenancy Agreements.

(9)  Having regard to the above, I accept that the 3^rd Manager must be informed of the Oral Agreement and the Tenancy Agreements by the 25/10/17 Meeting.

118.  In light of the above, I am of the view that, by signing the minutes containing the resolution approving payment of all legal fees of D1-2 in the present action (the “Legal Fees Resolution”), the 3^rd Manager had, at the time of the 25/10/17 Meeting, clearly and unequivocally expressed to all attending members his support of D1-2s’ position in relation to the lease of the Subject Lots, especially considering that:-

(1)  The members’ decision to fund D1-2s’ defence of the current action must be inextricably linked to the question of whether they regarded D1-2 as having breached their fiduciary duties to KY Tso (including whether they had entered into the Oral Agreement and signed the Tenancy Agreements without the consent of the 3^rd Manager).

(2)  As explained by D2 in his oral evidence, the very reason for convening the meeting was that D1-2 were sued by P for entering into the Oral Agreement and signing the Tenancy Agreements[146].

(3)  This point was acknowledged by P in cross-examination, when he said that he objected to KY Tso’s payment of D1-2s’ legal costs at both 22/10/16 Meeting and 25/10/17 Meeting because KY Tso should not bear the legal costs resulting from their misconduct.

(4)  As reflected by the fact that over 40 members of KY Tso (including P and all the Managers) attended the meeting, it was obviously a serious and consequential decision for the members to make, as the passing of the proposed Legal Fees Resolution could expose KY Tso to substantial legal costs. It is difficult to see why the 3^rd Manager would agree to allow KY Tso to pay the legal costs for D1-2s’ defence unless the 3^rd Manager agreed with the Oral Agreement and the Tenancy Agreements at the time of the 25/10/17 Meeting.

(5)  Yet, when the proposition in (4) above was put to P in cross-examination, he disagreed but was unable to offer any reason for his disagreement. When I asked him why he did not seek to clarify the matter with the 3^rd Manager, P was reluctant to give a straight answer. He first claimed that he did not ask the 3^rd Manager because he found it difficult to do so (好難, 有時傾唔埋). He then said that the 3^rd Manager did not need to explain the reason to him (佢無必要同你解釋點解).

(6)  When the topic was explored during Yun Fuk’s cross-examination:-

(i)  He claimed that the 3^rd Manager was under some misunderstanding because the 3^rd Manager did not know the situation, but he accepted that it was his own opinion only. In my view, given that Yun Fuk was not privy to the discussions between the Managers, such opinion is speculative.

(ii)  He also claimed that the 3^rd Manager had hearing problems because of his old age. Such evidence is at odds with the objective evidence that the 3^rd Manager had unequivocally indicated his support of the Legal Fees Resolution by putting his signature in the minutes.

119.  In his submissions, Mr Koo heavily relied upon the evidence of Yun Fuk and Wai Lun that the 3^rd Manager had allegedly told them that he did not consent to the Tenancy Agreements.

120.  In the Second Supplemental Witness Statement of Yun Fuk (“Yun Fuk 2^nd Supp WS”), his evidence was that:-

(1)  In the summer of 2018, the 3^rd Manager told Yun Fuk in a chance encounter that he did not agree with the Tenancy Agreements because they were not approved at a members’ meeting[147].

(2)  Since the commencement of the present proceedings, the 3^rd Manager had always opposed letting the Subject Lots to D3.

(3)  On 7 May 2023, Yun Fuk and Wai Lun invited the 3^rd Manager to a meeting at Yun Fuk’s residence (the “7/5/23 Meeting”) where it is alleged that the following was said by the 3^rd Manager[148]:-

(i)  He never agreed to the Tenancy Agreements and the conduct of D1-2.

(ii)  He had never delegated his power as Manager to the D1-2, including tenancy matters.

(iii)  Shortly after the commencement of these proceedings, D1-2 had asked Man Kin Hon and Man Hau Chung[149] (文效忠) to request the 3^rd Manager to sign the Tenancy Agreements, but he refused to do so.

(4)  Yun Fuk’s account of the 7/5/23 Meeting was confirmed by Wai Lun in his witness statement.

121.  There is no documentary evidence in support of the above. P had, on day 1 of the trial, informed the court of the discovery of an alleged audio recording of the 7/5/23 Meeting. The existence of the audio recording was never mentioned in any of the witness statements, and no explanation has been offered for the late discovery. Mr Koo has confirmed with me that P did not seek to adduce the said recording into evidence. Hence, no weight can be attached to it.

122.  I am also not satisfied that the above evidence gives a complete picture of the discussions between Yun Fuk and Wai Lun with the 3^rd Manager, and hence I do not accept it as reliable.

123.  First, the evidence does not sit well with P’s oral evidence above, which suggests that the 3^rd Manager was reluctant to cooperate with P.

124.  Second, I am not convinced that Wai Lun was a credible and independent witness:-

(1)  When it was put to Wai Lun in cross-examination whether the 3^rd Manager was asked to sign a declaration as to the factual matters of the present case at the 7/5/23 Meeting, the response from Wai Lun was that he could not remember. He went on to say that it was very likely that he would not have asked such a question. I find his answer to be bizarre and evasive, given that the purpose of the meeting was obviously related to the present action.

(2)  Later on, Wai Lun was asked whether P had invited the 3^rd Manager to be a witness in the present case. At first he said he could not confirm. Later on, he claimed that the 3^rd Manager had agreed to sign a witness statement but he did not know the actual reason of the withdrawal. Again, I find this answer to be somewhat evasive. From Wai Lun’s testimony, my impression is that he had strong feelings about the present dispute, and if he had taken the trouble to accompany Yun Fuk to attend the 7/5/23 Meeting to find out about the 3^rd Manager’s stance, it would be odd for him not to take steps to find out about the reason for the 3^rd Manager’s refusal to sign the statement.

125.  Third, I also do not find the evidence of Yun Fuk in this regard to be satisfactory:-

(1)  He also claimed for the first time that the 3^rd Manager had in fact agreed to make a witness statement for P at the 7/5/23 Meeting.

(2)  Yun Fuk claimed that he did not understand the 3^rd Manager’s reason for not signing the witness statement, and he believed that he might be subject to some kind of pressure (可能受到某一種壓力), but he did not elaborate what kind of pressure it was or who exerted pressure on him.

126.  In any event, I also have serious doubts as to whether these statements made by the 3^rd Manager to Yun Fuk and Wai Lun were reliable, particularly with respect to his position as at the time of the 25/10/17 Meeting:-

(1)  It is common ground that, since the 9/10/16 Meeting up to the 25/10/17 Meeting, the 3^rd Manager had not expressly indicated his view on the Tenancy Agreements to anyone, despite the various meetings, the letters from CMKI and the Offers from Yun Fuk. During the oral testimony, witnesses from both sides had described the 3^rd Manager as timid[150]. I find it odd that, according to the above evidence, the 3^rd Manager suddenly had no hesitation to express his view to Yun Fuk and Wai Lun.

(2)  As illustrated by the vehement objections expressed by P and Yun Fuk at the 9/10/16 Meeting, it is fair to characterise the present dispute as being controversial amongst members of KY Tso and both camps had been lobbying for support of members.

(3)  In my view, it is not unlikely that the 3^rd Manager was feeling pressure from both camps or his wife[151] and wished to distance himself from the dispute. This is consistent with a notice of resignation dated 1 July 2024 posted by the 3^rd Manager in which he purported to tender his resignation as manager of various tsos (including KY Tso).

(4)  In light of the above, there is a realistic possibility that the 3^rd Manager may feel pressured to say what Yun Fuk wanted to hear at the 7/5/23 Meeting, out of a desire to distance himself from the present litigation.

127.  As the 3^rd Manager is unwilling to sign any statement or attend court to give evidence explaining his situation and clarifying his true position under oath, the evidential value of the above hearsay evidence of his stance is limited.

128.  I have also considered the evidence of D1-2 regarding their contact with the 3^rd Manager since the commencement of the present action:-

(1)  D1 firmly denied in his oral evidence that he asked Man Kin Hon and Man Hau Chung (who were both representatives of the Village at the time) to request the 3^rd Manager to sign the Tenancy Agreements. This is consistent with his explanation that he was reluctant to request the 3^rd Manager to sign the Tenancy Agreements in light of the commencement of the present action, because he feared that the 3^rd Manager would also be sued by P if he signed the Tenancy Agreements[152].

(2)  D1 admitted that a short meeting was held in about 2018 or 2019 when all the Managers met with Man Hau Chung, but he denied having requested the 3^rd Manager to sign the Tenancy Agreements on that occasion. The meeting was only held because Man Hau Chung was a representative of the Village at the time and he wanted to understand the situation, but not much was discussed and the 3^rd Manager did not say anything of particular significance.

(3)  D2 could not recall whether he had asked the 3^rd Manager to sign the Tenancy Agreements, but he remembered that the 3^rd Manager did not overtly express any opposition to the Tenancy Agreement.

(4)  In my view, their evidence of the 3^rd Manager’s attitude is not unreasonable given the 3^rd Manager’s desire to distance himself from the dispute.

129.  In my view, it is clear that the 3^rd Manager was unwilling to cooperate with any of the parties to give evidence to this case. Therefore, I decline to draw any inference against any of the parties for failing to call the 3^rd Manager to give evidence:-

(1)  I am satisfied that both parties have made some efforts to approach the 3^rd Manager. Apart from P, it is not disputed that D1-2 had also sent a letter dated 8 March 2025 to the 3^rd Manager requesting him to provide a response to the List of Issues.

(2)  It was also open to both sides to make an application to subpoena the 3^rd Manager if they wished to do so. However, I do not agree that D1-2 can be criticised for opposing P’s last-minute application to subpoena the 3^rd Manager 5 days before the pre-trial review[153], as the introduction of a new witness of such importance would no doubt bring significant disruption to trial preparation and the trial timetable. It has not been suggested to me that P had any justification for the delay in making the said application.

130.  In the circumstances, I prefer the objective evidence of the undisputed record of the 25/10/17 Meeting. Therefore, I find that the 3^rd Manager had given actual consent to the Tenancy Agreements by no later than 25 October 2017.

O.  Whether D1-2 were in breach of duties in entering into the Tenancy Agreements?

131.  P’s case is that, even if the Oral Agreement and the Tenancy Agreements were authorised, D1-2 had nevertheless breached their duties by (i) failing to accept Yun Fuk’s Offers; and (ii) failing to obtain the best available market rent.

132.  As observed by Lok J in Man Mi Sang & anor v Man Shek Tong & ors [2018] HKCFI 2755[154] at §61, the mere fact that tso land was let at an undervalue per se does not constitute a breach of fiduciary duty on the part of tso managers. The managers’ duty as trustee is not an absolute one, and whether they were in breach of such duty depends on all the circumstances of the case.

133.  The standard is to use due diligence and reasonable care in the management of the trust property which an ordinary prudent man of business would exercise. This is an objective standard in which the court will test the conduct of the trustees against that of an ordinary prudent man of business, instead of the standard actually adopted by the trustee in the conduct of his own affairs. However, that test would be applied against the facts and circumstances at the time when the trustee had to act and with reference to matters known or ought to have been known to the trustee at that time. The duty is not discharged merely by showing that the trustee acted in good faith and with sincerity, see: Man Fong Hang v Man Ping Nam HCA 7935/1998 (unreported, 11 December 2003) at §167 per Lam J (as he then was).

134.  In approaching this issue, it is important to note that, prior to the onset of the dispute, it is common ground that the Subject Lots had not been rented out for some years. There is no evidence that anyone (whether outside or within KY Tso) had shown any interest in obtaining a lease of the Subject Lots. This is hardly surprising, especially for Lots 10 and 447, as it is common ground that there was no independent road access, since they were surrounded by either privately owned land or government land[155]. It is doubtful whether there was any readily available market for Lots 10 and 447.

135.  Given the above, D1-2 cannot be faulted for not taking steps to seek alternative offers when D3 offered to take up a lease of the Subject Lots around July 2016.

136.  I also do not consider D1-2s’ decision to enter into the Oral Agreement unreasonable, despite the discounted rent:-

(1)  The duty to obtain the best available market rent is not absolute. Much also depends on the surrounding circumstances and the other terms of the proposed transaction.

(2)  Although it is accepted by the witnesses that the rent of $3 per square foot as agreed with D3 is below market rent, D3 had agreed to undertake additional obligations under the Oral Agreement as follows:-

(i)  D3 agreed to carry out clearing and formation works on the Subject Lots.

(ii)  He also agreed to secure the departure of trespassers to Lot 10 and 447.

(3)  The terms in (2) above were not part of the Offers put forward by Yun Fuk.

(4)  Notwithstanding the discounted rent, an ordinary prudent businessman may well agree to the terms of the Oral Agreement to save himself the time and expense of having to undertake these tasks himself, especially when the exercise of negotiating with the trespassers may be time-consuming and involve considerable uncertainty.

(5)  Even if the eviction process may have been facilitated by P’s actions in erecting the fences in early 2017, it is not fair to criticise D1-2 with the benefit of hindsight.

137.  Further, having entered into the Oral Agreement, D1-2 were entitled to reject the Offers despite the higher rent offered by Yun Fuk.

138.  As D1-2 had already entered into the Oral Agreement with D3, they were in no position to accept Yun Fuk’s First Offer[156] which was made thereafter. Even if the Oral Agreement was not legally binding, a reasonable businessman in the same position might feel morally obliged to honour the bargain[157], especially where D3 had performed some of his obligations (eg by carrying out the formation works at Lot 3).

139.  For completeness:-

(1)  Further and in any event, I do not find the Offers from Yun Fuk to be genuine or made in good faith:-

(i)  As mentioned above, there is no evidence of any interest in the Subject Lots prior to 2016.

(ii)  The timing of the Offers is remarkable. The First Offer was made on 27 October 2016, about 2 weeks after the 9/10/16 Meeting, when the Subject Lots were first discussed in a heated debate.

(iii)  During Yun Fuk’s oral testimony, I asked him to explain his intended use for the Lots when he made the Offers. His response was that, so long as the use was legal, he had no specific intended use. He claimed that he could sub-let the Subject Lots to others or he could collaborate with another party and build a warehouse.

(iv)  His answer was wholly inconsistent with his witness statement, in which he claimed that he had a plan to build an open-air storage facility, given the Subject Lots’ suitable location and direct access to transportation[158].

(v)  The contradictory evidence of Yun Fuk is particularly unreasonable in light of his experience with tenancy matters in the Village.

(vi)  In my view, the real reason for Yun Fuk to put forward the Offers was to disrupt the lease of the Subject Lots to D3. I am not satisfied that Yun Fuk had any genuine intention to carry out the terms of his Offers.

(2)  Insofar as the views and wishes of members of KY Tso are relevant, the two camps have sought to rally the support of members and have produced documents signed by members indicating their support for or objection to the Tenancy Agreements. It is fair to say that there was no overwhelming majority in support of either position.

140.  Accordingly, I find that D1-2 were not in breach of their duties in: (i) entering into the Oral Agreement and the Tenancy Agreements; and (ii) rejecting the Offers.

P.  Summary of findings and conclusion on liability

141.  In summary, my key findings are as follows:-

(1)  There was no mandatory requirement (either under the TS Tso Scheme or by way of custom that the Managers had to obtain members’ approval for leasing out tso land.

(2)  At least parts of Lots 10 and 447 were subject to illegal occupation in or about August 2016.

(3)  The Oral Agreement was concluded in or about August 2016.

(4)  Pursuant to the Oral Agreement, D3 had procured the eviction of the trespassers of Lots 447 and 10 and carried out land formation and clearing works on the Subject Lots.

(5)  The 3^rd Manager had consented to the grant of tenancy of the Subject Lots to D3 and such consent was openly expressed by him in supporting the Legal Fees Resolution at the 25/10/17 Meeting.

(6)  D1-2 were not in breach of their fiduciary duties in (i) entering into the Oral Agreement and the Tenancy Agreements; and (ii) rejecting the Offers.

142.  Accordingly, the claims against D1-2 must fail.

143.  With respect to D3, as far as Lot 3 is concerned, it has already been resumed by Government on 11 October 2025. As at the date of this judgment, this court has not been informed of when Lots 10 and 447 will be actually be resumed pursuant to the earlier announcement by the Government.

144.  It is accepted that the original terms of the Tenancy Agreements had expired on 28 February 2022. As I have upheld the validity of the Tenancy Agreements, technically, D3 is contractually entitled to exercise the Option to Renew for Lots 10 and 447 up to the date of resumption.

145.  In any event, as I have rejected the main premise of P’s claim, which is based on D1-2s’ breach of duties and lack of authority, it is more appropriate for the Managers (as registered owners and trustees) to discuss and decide whether D3 should remain in Lots 10 and 447 and if so, on what terms, in light of the outcome of the present action.

146.  Accordingly, I also dismiss P’s claim against D3.

Q.  Reliefs

147.  Although not strictly necessary, for completeness, I shall also consider the question of relief if my findings on (i) the validity of the Tenancy Agreements[159]; and (ii) breach of duties[160] above were wrong.

148.  In his written closing submissions, Mr Koo confirmed with me that P seeks the following reliefs:-

(1)  declaratory reliefs to the effect that (i) the Tenancy Agreements were null and void and not binding on KY Tso; and (ii) D3 had no entitlement to possession of the Subject Lots;

(2)  an order that D3 shall return vacant possession of Lots 10 and 447; and

(3)  damages against D1-2.

Q1.  Declaratory reliefs

149.  It is trite that the power to grant declaratory relief is discretionary, see: Hong Kong Civil Procedure 2026 (“HKCP”), vol 1, §15/16/2.

150.  I am not minded to grant the declaratory reliefs sought, as they concern the status and use of the Subject Lots, and because the 3^rd Manager is not a party to these proceedings.

151.  In the context of tso land, it is also well established that in proceedings for possession against a trespasser where the tso managers have failed to act, the managers should be joined as parties to the action, see: Leung Kuen Fai v Tang Kwong Yu (or U) T’ong or Tang Kwong Yu Tso [2002] 2 HKLRD 705 per DHCJ Johnson Lam (as he then was); Wong Shing Chau v To Kwong Keung [2008] HKC 372 at §10 (per Le Pichon JA); and Tang Man Kit v Chong Kee Ting Vicwood HCA 1222/2010 (unreported, 14 July 2011) per Recorder Anderson Chow SC (as he then was) at §§17-20.

152.  By reasons set out above, the 3^rd Manager is clearly a necessary and proper party to the present proceedings and should have been joined.

153.  Under RDC O 15 r 6, all parties to the dispute should be brought before the court at the same time such that the dispute may be resolved effectively and fully determined without delay, inconvenience and expense of separate actions and trials even if there is no cause of action against the intended party, see: Koo Ming Kown v Rev Mr Mok Kong Ting & Ors [2018] HKCFI 967 at §12 per DHCJ To.

154.  Further, ordinarily the judgment of the court does not bind a person who is not a party or who is not represented by a party before the court, see: HKCP, vol 1 at §15/13A/1. In the context of actions concerning trust properties, a procedure is prescribed under RDC O 15 r 13A whereby a party to such actions can apply for an order that notice of the action be served on a non-party who will or may be affected by any judgment given therein. If the non-party was served but failed to file an acknowledgment of service to join the action, he shall be deemed to be bound by any judgment given in the action as if he was a party thereto. No such procedure has been invoked with respect to the 3^rd Manager.

155.  In my view, the absence of the 3^rd Manager is a weighty, if not conclusive, factor in the exercise of discretion against granting any declaratory relief in the present case.

156.  Save in very exceptional circumstances, declarations should only be granted when persons whose rights would be affected by the grant of the declarations are before the court so that they can be heard, even if the interested party will not be bound by the declaration, see: Darby International Investment Ltd v Rong Tai International Shipping Ltd HCMP 1438/2013 (unreported, 2 December 2013) at §37. In that case, DHCJ B Chu (as she then was) cited the trite principles enunciated in London Passenger Transport Board v Moscrop [1942] AC 332 at 345, where the House of Lords refused to grant the declaration sought on the basis that some of the interested parties had not been joined in the proceedings:-

“It is true that in their absence they were not strictly bound by the declaration, but the courts have always recognised that persons interested are or may be indirectly prejudiced by a declaration made by the court in their absence, and that, except in very special circumstances, all persons interested should be made parties, whether by representation orders or otherwise, before a declaration by its terms affecting there is made.”

157.  In the context of trust claims, the Court of Appeal authority of Ip Cheung Kwok v Sin Hua Bank Trustee Ltd [1990] 1 HKLR 497 is instructive. In that case, P sued in his personal capacity seeking declarations that certain trusts made by a settlor before his death were void and that he be declared a sole beneficiary of the estate of the settlor. Although the Court of Appeal held that it had jurisdiction to grant the declarations sought (pp 509-510), applying the principle in London Passenger Transport Board, it declined to exercise its discretion to grant the declarations sought on the basis that the party representing the settlor’s estate was not made a party. At 511G-H, Clough JA held that:-

“Any order made in the absence of the settlor’s personal representative or a party representing the settlor’s estate would not bind his personal representative when duly constituted. There would therefore be multiplicity of proceedings. If the order were adverse to the estate it could be embarrassing to the personal representative. Moreover the personal representative might take a different view of the estate’s claim to the property and wish to compromise it with the trustees and the other interested parties. Furthermore the authorities seem to be wholly against the granting of declaratory relief in such a situation save in exceptional circumstances, which do not exist here.”

158.  In the present case, no exceptional circumstances have been identified. There is also no explanation from P as to why the 3^rd Manager was not joined as a party.

159.  Mr Koo argued that the non-joinder of the 3^rd Manager is not fatal to the claim for declaratory reliefs as he is bound by the judgment of this court, given that the current proceedings were brought by P as a representative action. He relied upon the following passage from Sir Elly Kadoorie & Sons Ltd v Bradley [2023] 3 HKLRD 587 at §11(5) which refers to Lloyd v Google LLC [2022] AC 1217 that:-

“The ability to act as a representative under the rule does not depend on the consent of the persons represented but only on community of interest between them. There is ordinarily no need for a member of the represented class to take any positive step, or even to be aware of the existence of the action, in order to be bound by the result.”

160.  Therefore, Mr Koo argued that, as the 3^rd Manager is a member of the tso, by virtue of the above passage, he would be bound by the outcome of the present action.

161.  With respect, the above passage does not support P’s case. The 3^rd Manager plays two roles, namely as a beneficiary by virtue of being a member of KY Tso and as a manager. Even if one assumes that the 3^rd Manager is bound as a beneficiary on account of community of interest, he cannot be bound in his capacity as trustee, which clearly involves a different interest from that of a beneficiary.

162.  In any event, applying the principles in London Passenger Transport Board as enunciated above, the absence of a necessary party whose interest would be directly or indirectly affected by the outcome (regardless whether he is bound by the judgment) is a weighty factor against exercising the discretion.

163.  Accordingly, I would in any event decline to exercise my discretion to grant the declarations sought.

Q2.  Order to return possession

164.  Were I to find that the Tenancy Agreements were null and void, I would make an order that D3 do return vacant possession of Lots 10 and 447:-

(1)  The only justification pleaded by D3 for remaining on the Subject Lots despite the lapse of the Tenancy Agreements is that D1-2 (with no objection from the 3^rd Manager) had granted to D3 the Oral Licence to remain in the Subject Lots until the conclusion of the present proceedings, so as to consider whether to exercise the Option to Renew[161].

(2)  Therefore, even if were to I accept that the Oral Licence was granted on the terms pleaded by D3 with the authority of all 3 of the Managers, it would have lapsed by now.

Q3.  Damages

165.  The damages claim is based on the difference between the rent paid under the Tenancy Agreements and the rent which would have been received by KY Tso had the Offers been accepted.

166.  In my view, such loss is not established:-

(1)  As I have found that the Offers were not genuine, causation has not been established between the alleged breach of duties and the alleged loss. The rent proposed in the Offers should not form the basis for the assessment of loss.

(2)  Although the witnesses have expressed their opinions in their evidence as to the prevailing market rent for the Subject Lots[162], in the absence of expert evidence, I am not satisfied that there is reliable evidence of the best available market rent.

167.  Hence, at most, I would award only nominal damages against D1-2 even if P’s claims are established.

168.  More fundamentally, I am unable to accept P’s proposal as to the terms of payment of damages. The present action is brought by P on behalf of KY Tso. Hence, any damages recovered are property of the tso. Yet, in his closing submissions, Mr Koo asked for the damages to be paid to P. It is claimed that such damages would be held on trust for the tso, and that it would be a matter for members of KY Tso to decide what to do with the funds.

169.  No authority has been provided as to whether the proposed payment to a single member of the tso is even permissible, or whether such orders have ever been made.

170.  In any event, I am not satisfied that P is the appropriate trustee:-

(1)  No view has been sought from members of KY Tso as to their wishes for the court’s consideration.

(2)  P has not offered any undertaking or proposed terms as to how the trust would operate or how the trust funds would be used, despite Mr Koo’s claim that P would have a discretionary power to manage the trust funds.

(3)  Given the conflict between P and D1-2 (who remain as Managers), P is not sufficiently independent to be made a trustee to hold tso properties on trust.

171.  Hence, I reject P’s proposal for any damages awarded to be paid to him.

R.  Disposition

172.  Accordingly, I dismiss P’s claims against the defendants.

173.  There is no reason that costs should not follow the event. I make an order nisi that: (i) P do pay Ds’ costs of the action (including any costs reserved) with certificate for counsel, to be taxed if not agreed; (ii) Costs incurred prior to the transfer of the action from the High Court to the District Court shall be taxed at the District Court scale[163].

174.  It remains for me to thank counsel for their helpful assistance.

Copy Extract of Lot Index Plan with the Subject Lots marked in Yellow