WAH HING STRATEGY COMPANY LTD v. TANG WAI HUNG

HCA 16690/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 16690 OF 1999

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J U D G M E N T

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Introduction

1.  The 3 actions before this court concerned a development of land in the New Territories, and the 3 actions were ordered to be heard and tried at the same time or immediately one after the other.

2.  The plaintiff (“Wah Hing”) was the developer.  The 3 defendants were indigenous villagers, and they are Tang Wai Hung in HCA 16690/1999 (“D1”), Tang Wai Leung in HCA 16692/1999 (“D2”), and Tang Wai Man in HCA 16693/1999 (“D3”).  They are related and are cousins.

3.  By the time of the commencement of the trial, none of the defendants was legally represented, although they had been for the past almost 15 years.  D1 and D3 applied for legal aid the day before the commencement, and this resulted in an automatic stay.  D3, the only defendant who turned up at the trial, had tried to apply for an adjournment of the trial.  This court lifted the legal stay and did not allow any adjournment in view of the procedural history of the matter.  This will be set out later in this judgment.

Background 

4.  Wah Hing, a subsidiary of Wah Hing Group Co Limited, was/is a real estate developer.  Wah Nam Holdings Co Limited (“Wah Nam”), and also a company called Nobel Sheen Investment Limited (“Nobel Sheen”) were/are also subsidiaries of Wah Hing Group Co Limited.

5.  In about early 1992, Wah Hing was desirous of developing land in Yuen Long and building thereon small houses as provided under the then Buildings Ordinance (Application to the New Territories) Ordinance Cap 121 (“Small Houses”), by the purchase of a piece of land situate at Lot No 371A and 371 RP in DD 112 in Yuen Long (“Land”) and obtaining from indigenous villagers holding rights to build a Small House under the then Government policy (“Ding Rights”).

6.  The Land was subject to a lease from the Government dated 24 January 1905 for a lease term of 75 years from 1 July 1898 renewable for 24 years, which was then further renewed until end of June 1997 and then extend until 30 June 2047 (“Government Lease”)[1].

7.  Wah Hing’s initial partner in the above proposed development on the Land (“Development”) was a company called Mark Enterprise Limited 標準實業有限公司 (“Mark Enterprise”) of which one of the directors was called Man Kwok Keung (“Man”).

8.  Apart from Mark Enterprise and Man, there were two other “go-betweens” or middle men between Wah Hing and the indigenous villagers who were involved in the discussions and negotiations of the Development, namely Wong, and one Lai Kuen (“Lai”).

9.  Wah Hing’s case was that it was Wong who proposed to them that the Land would be suitable for development, and that Wong and Lai represented 15 lawful indigenous villagers (“15 Villagers”) who were entitled to Ding Rights and who were willing to facilitate the Development by empowering Wah Hing to apply for their Ding Rights in return for a fee (“Ding Fee”).  The 3 defendants were among the 15 Villagers.

10.  According to Wah Hing, agreement was then reached between the company and the 15 Villagers, including the defendants, through Wong and/or Lai in relation to the Development (“Agreement”). As part of the Agreement, specific lots of the Land were to be purchased by Wah Hing and then assigned to the 15 Villagers respectively at a “fictitious” consideration and that the 15 Villagers would hold their respective lots in trust for Wah Hing. Further, under the Agreement, Wah Hing was to pay the 15 Villagers their Ding Fees by instalments until the Development was completed. 

11.  Pursuant to the Agreement, two sums were paid by Wah Hing through Mark Enterprise to Wong on 29 January 1992, one being a sum of HK$400,000 to Wong personally, and another HK$500,000 being as 1^st payment for Ding Fees. 

12.  The above payments were evidenced by the following :

(i) A memorandum/receipt dated 29 January 1992, bearing Wong’s name as the recipient and Lai’s name as witness,  indicating that Wong had received a cheque from Mark Enterprise on behalf of Wah Hing for the sum of HK$400,000 (“1^st Receipt”)[2];

(ii) A memorandum/receipt dated 29 January 1992, bearing Wong’s name as the recipient and Lai’s name and signature as witness, indicating that Wong had received a cheque from Mark Enterprise for HK$500,000, stated to be for the 1^st payment for purchase of Ding Rights (“2^nd  Receipt”)[3];

13.  On the same day, 29 January 1992, 10 of the 15 Villagers each received cash of HK$50,000, said to be from Mark Enterprise for the 1^st payment for purchase of Ding Rights, and each signed a preliminary agreement in Chinese with Wah Hing (“Preliminary Agreement”). Wong had signed on the Preliminary Agreement on behalf of Wah Hing, and further he had signed in the capacity of a witness.  Only copies of those Preliminary Agreements signed by D1 and D2 had been produced by Wah Hing[4], together with their respective receipts of cash of HK$50,000[5], and no Preliminary Agreement or any receipt by D3 had been produced.

14.  After the above payments, on 3 March 1992, Wah Hing bought the Land at a total consideration of HK$1,588,898.

15.  Wah Hing then made a further payment to Wong of HK$250,000 through Mark Enterprise on 19 March 1992, which appeared to be for the remaining 5 of the 15 Villagers, again stated to be for the 1^st payment for purchase of Ding Rights.  This was evidenced by a memorandum/receipt dated 19 March 1992 bearing Wong’s name as recipient and Lai’s signature as witness, indicating that Wong had received a cheque from Mark Enterprise for HK$250,000, for the 1^st payment for purchase of the Ding Rights (“3^rd Receipt”)[6]. 

16.  On 13 April 1992, Wah Hing and each of the 15 Villagers including the defendants executed an assignment in respect of specific lots of the Land (“Assignment”), at a consideration of HK$130,000 (“Consideration”). The defendants then became registered owners as follows:

(i) D 1 of sub-section 2 of section A of Lot No 371 (“Lot 2A”)[7];

(ii) D2 of sub-section 3 of section A of Lot 371 (“Lot A3”)[8];

(iii) D3 of Section E, Lot No 371 in DD 112 (“Lot E”)[9];

17.  It was Wah Hing’s case that the defendants never paid the Consideration.  On the same day 13 April 1992, a power of attorney (“P/A”) was signed by each of the defendants, in favour of Wah Hing, and also on the same day, each of them executed a deed of development with Wah Hing, on the same day (“Deed”).  The other of the 15 Villagers executed similar documents between 10 and 15 April 1992.

18.  It was also Wah Hing’s case that an oral agreement was made between the 15 Villagers, Wong and Lai, that each of the 15 Villagers was to pay HK$4,000 agency fees to Wong and Lai, and that such agency fees were paid by Wah Hing. 

19.  Thereafter, as pleaded in its statement of claim[10], Wah Hing made application to the District Land Officer on behalf of the 15 Villagers on about 24 April 1992 for the grant of a building licence in respect of each of their Lots of the Land (“Building Licence”).

20.  Sometime around 17 April 1993, Mark Enterprise left the Development, leaving Wah Hing as the sole developer.

21.  The Building Licences in respect of the defendants’ Lots were issued on different dates, as follows:

(i) The Building Licence in respect of Lot 2A was issued to D1 on 25 June 1997[11];

(ii) The Building Licence in respect of Lot 3A was issued to D2 on 8 March 1996[12];

(iii) The Building Licence in respect of Lot E was issued to D3 on 14 September 1995[13].

22.  According to Wah Hing, various payments were made to Wong and Lai on behalf of the 15 Villagers, which totalled HK$2.7m between 29 January 1992 to 11 October 1997, namely HK$180,000 for each, and further according to Wah Hing, it had also paid HK$50,000 direct to each of the 15 Villagers, thus making a total of HK$230,000 for each.

23.  The defendants denied that Wah Hing had paid them this sum.

24.  Anyway, on 18 January 1996, D1 and D3, together with another of the 15 Villagers, suddenly sent or attempted to send a joint letter to the District Land Office to, among other things, cancel the Building Licenses issued to them respectively and also all P/As signed by them previously[14] (“Cancellation Letter”).  In the Cancellation Letter, the name and telephone of the contact person was given to be that of Wong.  The Cancellation Letter was copied to various persons, including Wah Hing and Wah Nam.

25.  Subsequent thereto, on 14 June 1997, D2 and D3 each signed another power of attorney, irrevocably appointing a property company Grand Plaza Development Limited (“Grand”) as the attorney to deal with their respective sections of the Land[15].  It was not clear whether D1 had also signed such a power of attorney in favour of Grand, as it was not produced, nor was this pleaded by Wah Hing in its statement of claim.

26.  The Development was completed sometime in 1999. The certificate of compliance (“Certificate”) in respect of D3’s Lot E was issued by the District Lands Office on 30 November 1999 and registered in the Land Registry[16]. For some reasons, no such Certificates seemed to have been registered in respect of D1’s Lot 2A and D3’s Lot 3A, but it was not really disputed that they were also issued at about end of November 1999.

27.  However, prior to the issue of the Certificate, on 11 August 1999, the defendants each issued a writ in HCA 12910, HCA 12911, 12912 of 1999 claiming against Wah Hing and and a finance company called Panbillion Finance Company Limited (“Panbillion”), for a declaration that the Deed was void, or alternatively Wah Hing was in breach of terms of Deed and the defendants were entitled to rescind.  The writs, although registered in the Land Registry, had not been served on Wah Hing.

28.  This was then followed by Wah Hing’s present 3 actions issued on 23 October 1999.  Wah Hing’s case was based mainly on that under the Agreement, the PA, and the Deed, the defendants held all their legal and beneficial interest in their respective lots of the Land and the Small House built thereon for Wah Hing and Wah Hing sought the following reliefs:

(i) A declaration that the power of attorney granted to Grand by each of the 3 defendants was/is void;

(ii) An order that the defendants was/is to refrain from granting any power of attorney to any one without the prior written consent of Wah Hing.

29.  Wah Hing had originally sought damages, but the company’s Counsel Mr Cheng informed this court at the trial that this would not be proceeded with.  Further, notwithstanding leave had been given on 29 January 2013 for Wah Hing to amend the reliefs it sought, the amended statement of claim was never filed, and Mr Cheng referred to only the above reliefs sought in the original statement of claim.

30.  The defendants’ defence was similar and was based on mainly:

(i) Wah Hing had represented to the defendants that the Hong Kong Government would allow building agreements to be made in contemplation of removing the restriction of alienation (“Representation”), and that the defendants had relied on the Representations and were induced to enter into the Deed.

(ii) The Agreement and the Deed was in nature a building agreement prohibited under the Building Licence and thereby void or voidable;

(iii) Further, or in the alternative, Wah Hing had breached the Agreement and/or the Deed and/or the Building Licence;

(iv) The defendants were unable to contact the directors or officers of Wah Hing during the period from mid 1995 to early January 1996 and in view of Wah Hing’s breaches, the defendants were entitled to treat Wah Hing’s conduct as unilateral repudiation of the Deed and the defendants  accepted the same and sent the Cancellation Letter to cancel Wah Hing’s authority to represent the defendants in the matter.

31.  The defendants also counterclaimed that the registration by Wah Hing of the Deed at the Land Registry be vacated and a declaration that the Deed was void.

32.  The parties did instruct a single joint valuer to prepare a report on the valuations of the defendants’ Lots on various dates, but neither side seemed to regard these valuations relevant any more and neither referred to the same at the trial.  No doubt had damages been sought by either side, the valuations would have been relevant.

The Legal Aid Stay and D3’s application for adjournment

33.  I will set out the brief procedural history of these 3 actions.

34.  After service of their writs in the 3 actions, there being no acknowledgment of service filed by the defendants, Wah Hing had issued a summons for interlocutory judgment to be entered on 7 January 2000. At that time a Mr Chan Kwok Shiu (“Chan”) filed a supporting affirmation on 16 February 2000[17] on behalf of Wah Hing (“Chan’s Affirmation”).  The defendants appointed solicitors that day and D3 filed an affirmation in opposition on the same day[18] (“D3’s Affirmation”).  D1 filed his on 5 April 2000[19] (“D1’s Affirmation”).  Thereafter, by consent, Wah Hing did not proceed with their application for interlocutory judgment.  D2’s affirmation was later filed on 30 May 2000 (“D2’s Affirmation”), as he was at that time apparently residing in a remote part of Ireland.

35.  Then on 15 May 2000, Wah Hing issued a further summons for interlocutory judgment when the defendants failed to file their defence within time.  This was later adjourned sine die and leave was given to the defendants’ defence and counterclaim being filed out of time.

36.  The first directions for discovery and exchange of witness statements were given in July 2000 and signed witness statements were ordered to be exchanged. The parties filed their respective list of documents.  Leave was given in February 2001 to the defendants to amend their respective defence and counterclaim, and at the same time, D1’s Affirmation, D2’s Affirmation and D3’s Affirmation were ordered to stand as their respective witness statements, and leave was given to Wah Hing to file and serve a witness statement.

37.  Thereafter, there was inaction in all 3 actions for about 10 years.  Eventually, in February 2011, the defendants changed solicitors and filed a notice of intention to proceed.  This was followed by the defendant’s summons for leave to re-amend their defence and counterclaim, and leave was so granted.

38.  Subsequently, detailed case management directions were by consent ordered on 28 September 2011, among which, leave was given for the parties to file and serve mediation response, to file supplemental lists of documents, and further to serve signed supplemental witness statements on or before 30 November 2011, and for a valuation report to be prepared by a single joint expert. 

39.  Neither side adhered to the timetable in relation to the filing of supplemental witness statements.  The only witnesses at that time were Chan for Wah Hing, and the defendants themselves.  Leave did not seem to have been sought for Chan’s Affirmation to stand as his witness statement, but no objection was so taken to this.

40.  None of the defendants sought leave to update their respective affirmations filed over 10 years earlier, nor did Chan. 

41.  According to Wah Hing’s listing questionnaire filed before the case management conference, it was unable to locate and contact Chan at that time, and that another witness would be required.

42.  Directions for setting down the 3 actions were given at end of March 2012.  Thereafter, on 9 May 2012, Wah Hing issued a summons for leave to serve a witness statement from its former administration manager Ning Hoi Man (“Ning”), which was granted. 

43.  The trial had originally been fixed to commence on 29 January 2013, and a PTR was fixed on 30 October 2012.  The day before the PTR, the defendants issued a summons for leave to file a witness statement from Wong.  There was no objection from Wah Hing.  At the PTR, the parties indicated that there would be 2 witnesses on behalf of Wah Hing, Chan and Ning, and 4 witnesses on behalf of the defendants, namely D1, D2, and D3 and also Wong.  All appeared to be in order for the commencement of the trial on 28 January 2013.

44.  Wong’s witness statement was later filed on 29 October 2012.  

45.  One day before the commencement of the trial, Wah Hing suddenly took out an application to amend the reliefs sought in its statement of claim, and before the commencement of the trial, the parties then sought time to discuss in relation to a settlement, which regrettably did not bring about any settlement.  Leave was then given for Wah Hing to amend its statement of claim, but as mentioned earlier, the amended statement of claim was never filed.  Both Counsel informed the court that the parties were genuine in trying to reach a settlement, and both sought an adjournment of the trial, indicating to the court that the parties undertook to further attend mediation, and Wah Hing also sought leave to file a 2^nd witness statement from Ning, which was unopposed.

46.  The defendants were still represented by Counsel at that trial, but it was clear that neither side was ready or prepared to proceed with the trial.  The trial was then adjourned and refixed to commence on 11 March 2014.  At the PTR on 21 January 2014, the defendants were still represented by Counsel at the time and their then Counsel informed this court that the defendants would only be calling 2 witnesses at the trial.

47.  Then on 3 March 2014, the solicitors for all 3 defendants suddenly issued an application to cease to act for them which was fixed for hearing on 10 March 2014, one day before the commencement of the trial.  After the solicitors issued their application, D1 and D3 filed notices to act in person on 7 March 2014.  This court later granted an order on 10 March 2014 for the solicitors to cease acting for D2. 

48.  Later on that day 10 March 2014, D1 and D3 applied for legal aid. 

49.  On the first day of the trial, as mentioned earlier, only D3 turned up.  This court was told that the Director of Legal Aid was considering the applications of D1 and D3, and that D2 was not in Hong Kong. 

50.  Mr Cheng informed this court that the new trial dates were fixed as early as around 2 May 2013, about 10 months before the commencement.  The 3 defendants were legally represented throughout the 3 actions by solicitors and also instructed Counsel to attend the PTR.  At that time, all parties indicated to the court that they were ready to proceed to trial.

51.  As mentioned earlier, D3 had tried to apply for an adjournment of the trial.  He said he could not afford the legal costs of the trial, but there was no evidence as to any change in his financial circumstances during the period between the PTR and the trial.  D3 then claimed he had lost contact with the defendants’ key witness Wong, who had disappeared.  There was, however, no evidence as to when Wong could be found.

52.  Mr Cheng objected to the trial being further delayed.  The 3 actions were commenced some 15 years ago.  Having regard to there having already been a long delay in bringing the 3 actions to trial with the trial dates already vacated once a year ago at last minute, and there being no satisfactory explanation why suddenly the defendants claimed they could not afford legal fees, and two of them did not even bother to turn up, I ordered that the legal aid statutory stay be lifted and the trial to proceed.

53.  The legal aid applications of D1 and D3 were subsequently refused on 25 March 2014.

Main Issues

54.  The  issues set out in Mr Cheng’s skeleton submissions were as follows:

(i) Whether the defendants held the Land as registered owners in trust for and on behalf of Wah Hing?

(ii) Whether the defendants were legal and beneficial owners of the Land and the Small Houses erected thereon? 

(iii) Whether Wah Hing had induced the defendants into entering the Deed and executing the PA by the Representation and so as to entitle the defendants to rescind them?

55.  As submitted by Mr Cheng at his opening, his 2^nd issue was a corollary of his 1^st issue.

56.  D3’s case at the trial, as somewhat different from his pleadings, was that he and/or the defendants were all along the true legal and beneficial owners of their respective lots of the Land, and that the Agreement and the Deed was only to jointly develop the Land with Wah Hing and there was no agreement for Wah Hing to purchase their respective Ding Rights. He then listed 5 questions for the court to consider, which I understand to be :-

(i) Was the Deed a proper agreement for development or for purchase of Ding Rights?

(ii) What was meant by purchase of Ding Rights?

(iii) Was Wah Hing in breach of the Deed?

(iv) Was D3 reasonable in rescinding the Deed?

(v) Was D the legal and beneficial owner of his lot of the Land?

57.  Having considered the matters raised by both sides, I am of the view the main issues can be summarised as follows:

(i) Was there the Agreement between the parties to purchase the defendants’ Ding Rights? (“Issue 1”)

(ii) Whether Wah Hing had made the Representations to the defendants and induced the defendants into entering into the Agreement and/or the Deed and/or executing the P/A? (“Issue 2”)

(iii) Was the Agreement and/or the Deed void? (“Issue 3”)

(iv) Whether the defendants held their specific Lots and the Small Houses thereon in trust for Wah Hing?  (“Issue 4”)

(v) Was Wah Hing in breach of the terms of the Agreement and/or the Deed and/or the Building Licenses (“Issue 5”)

The Evidence

Wah Hing’s Witnesses

58.  Both Chan and Ning attended the trial to give oral evidence on behalf of Wah Hing.

59.  Chan was a technical officer of Wah Hing and in 1992-1993, was a plan design manager.  He initially worked in the office, and later after the commencement of the Development, he was a supervisor at the construction site until the Development was completed sometime in 1999.  He was later transferred to work for Wah Nam on 1 November 1999.

60.  Ning was the former administration manager of Wah Hing, and she initially joined Wah Hing in 1993 as a senior secretary, and she left in early 2001. 

The defendants’ witnesses

61.  D3 gave oral evidence and conducted the trial in person.

62.  The defendants’ key witness Wong, one of the middle men, was said to be the consultant and contractor for the Development, and described by Ning as the Head of the Dings “丁頭”.  Wong had given a witness statement on behalf of the defendants on 30 October 2012 but had disappeared since.

63.  In Wong’s witness statement, he had tried to explain that he was responsible for preparatory works for the Development and the liaison work with nearby villages, and that he did not ‘partner’ with Lai, nor did he serve as an agent/representative of the 15 Villagers (including the defendants), and that he only played the role of a bridge between Mark Enterprise and the 15 Villagers and did not approach Wah Hing directly.  Wong said Mark Enterprise retained his services for the Development at a sum of HK$1.5m.  Wong further disputed that the 3 characters of his name 王德明 which appeared against “the recipient” “收款人” on the 2^nd Receipt and the 3^rd Receipt, namely for the 1^st instalment of purchase of Ding Rights were his signatures, and he said these two receipts were fabricated.  He claimed that he had not received those cheques mentioned therein.

64.  What was written down as Wong’s name on the 2^nd and the 3^rd Receipts were merely “the recipient” “收款人”, and not purported to be the signature of the recipient or “收款人簽名” (emphasis added), as stated on the Paying Certificate dated 4 March 2013 or on some of the other receipts[20]. 

65.  Wong’s witness statement was dated 29 October 2012, and there had not been any application on behalf of the defendants for any handwriting expert evidence to be called.  Anyway, there had not been any report made to the police in relation to any forgery of the 2^nd Receipt or the 3^rd Receipt.

66.  What Wong had said in his witness statements seemed also to be inconsistent to the documentary evidence.  In fact, there were other documents dated 29 January 1992, apart from the 2^nd Receipt, namely the 10 Preliminary Agreements, and also the 1^st Receipt.  Wong was named as the payer on behalf of Wah Hing, and also the witness, on the Preliminary Agreements, and the 1^st Receipt also bore Wong’s name as recipient, and indicated that Wong had received a payment of HK$400,000 personally that day.  There was no allegation by Wong in his witness statement that he never received the said HK$400,000.  Further, his denial of having received a total of HK$750,000 on behalf of the 15 Villagers for the 1^st payment of the Ding Fees was not supported by those receipts signed by the some of the 15 Villagers and produced by Wah Hing/Ning.

67.  In any event, D3 said during the trial Wong had absconded “走咗佬”.  As Wong failed to attend trial to be cross examined, I give no weight to Wong’s evidence in his witness statement.

68.  So far as D1 and D2 were concerned, although after D3 had given evidence, D3 suddenly told the court that D1 just telephoned him to say he would attend the trial the following day, D1 never turned up.

69.  D1’s Affirmation and D2’s Affirmation contained similar, if not identical, evidence as in D3’s Affirmation.  I note, however, there were some differences, such as the Building Licences relating to D1’s Lot A2 and D2’s Lot A3 were issued on different dates to that relating to D3’s Lot E, and the Cancellation Letter was signed by D1 and D3, but the power of attorney to Grand was signed by D2 and D3.  However, their case and their defence and counterclaim was essentially the same. 

70.  The alleged Agreement regarding the Development was some 22 years ago, and the evidence of Chan, Ning, and D3 would have to be considered in that light.  Contemporaneous documents were helpful in shedding light on what happened.  I do not find D3 a reliable witness as what he said was not supported by contemporaneous documents and I prefer the evidence of Chan and Ning.

71.  For the avoidance of doubt, insofar as the matters set out in this judgment differ from the evidence of Wah Hing’s witnesses Chan and Ning, or D3, this is because I have preferred the evidence of the other party, or another witness, as I have had the chance of observing the demeanour of these witnesses, or because I consider that the documents produced confirm my finding of fact.

Legal Principles

72.  Mr Cheng only referred the court to one authority Best Sheen Development Ltd v The Official Receiver and Trustee of the Property of Lai Thomas, a Bankrupt HCMP 7250/99, [2001] 1 HKLRD 866.

73.  In Best Sheen, there was a declaration of trust made by the bankrupt, an indigenous villager in respect of land in the New Territories, and the plaintiff developer had entered into an agreement with the bankrupt to build a “small house” on the land, and the plaintiff sought a declaration that it was the sole beneficial owner of the land held by the bankrupt.  The issue was whether the court, by making the declaration sought, would be lending its aid to the enforcement of an illegal agreement between the plaintiff and the bankrupt to make a misrepresentation to the Government in order to obtain concessionary terms in the building licence. Although there was an assignment of the land by the plaintiff to the bankrupt, the consideration was never paid by the bankrupt.  However, in view of a receiving order made against the bankrupt and registered against the Land, the declaration of trust was brought to the attention of the District Lands Officer, and the granting of the building licence was withheld.

74.  There was no dispute in Best Sheen that the consideration for the land was never paid by the bankrupt, and Yuen J, as she then was, held that there was in fact a “development scheme” as asserted by the plaintiff, and that at heart, the “development scheme” was a contract which had as its object the deliberate commission of the tort of misrepresentation on the Government as landlord, and a contract to commit a civil wrong would be illegal under common law.  She further said that if the plaintiff was seeking to enforce the “development scheme” against the bankrupt, the court would not do so, because it would then be lending its aid to the performance of an illegal contract which would be contrary to public policy[21].

75.  However, she was satisfied that that the declaration sought that the plaintiff was the beneficial owner of the land did not amount to enforcement of the illegal contract, and that the plaintiff could rely on the declaration of trust, and even if that declaration of trust were to be invalid, the plaintiff could rely on its beneficial interest under a resulting trust, which could be implied where an attempted express trust failed[22].

76.  In Best Sheen, the court was also referred to the Court of Appeal decision in Li Pui Wan v Wong Mei Yin CACV No 49/97,  [1998] 1 HKLRD 84.  In Li Pui Wan, the government had granted land to some indigenous villagers and they had obtained the rights for construction of small houses, and the land together with their rights were assigned to developers, and one of them, the respondent, entered into agreement to sell one unit in a small house to the appellant.  A dispute then arose between them and on the cross appeal one of the main issues raised by the respondent was whether the parties were in breach of the conditions of grant by entering into the transaction between them prior to obtaining government approval and before payment of the premium and that the transaction was not in accordance with public policy and thus illegal and not enforceable.

77.  It was held by the Court of Appeal that although the transaction was in breach of the conditions of grant, there was inadequate evidence in that case to show that the transaction was necessarily in breach of public policy, and even if the transaction between the parties had an element of illegality because the government’s consent had not been obtained and additional premium had not been paid, it did not constitute a breach of public policy because the contractual documents showed that the parties had intended to carry out and complete the transaction according to government requirements, including the payment of premium[23].

78.  The then Yuen J distinguished Li Pui Wan from the case before her, which was not a case of merely premature disposition of an interest in property which did belong to an indigenous village and who was thus entitled to concessionary terms to build a house on the property (emphasis added).  The subject land in Best Sheen was never the bankrupt’s to own, and the plaintiff as the true owner would not have been entitled to the concessionary terms in the building licence.

79.  In fact, Best Sheen was also considered in another Court of Appeal decision Madam Chung and others v Hang Tak Buddhist Hall Association Limited and Goodmatch Limited CACV 20/2001, 22 May 2001, where the issue was the legality of a development deed between the developer and “owner” of New Territories land, an indigenous villager, to build a small house.  In the case of Madam Chung, the plaintiffs’ case was that the deed of joint development was unenforceable on public policy grounds because its performance would necessarily involve the swearing of false declarations and making of misrepresentations to the government and hence the commission of illegal acts.  Le Pichon JA had said the holding in Best Sheen that the agreement was correct and that the deed of joint development was unlawful and unenforceable on public policy grounds under common law.

80.  With the above principles and guidance in mind, I turn to the present case.

Issue 1

81.  Under the Agreement alleged by Wah Hing, the defendants agreed that, for monetary consideration, Wah Hing was to have the power and right to apply for the defendants’ Ding Rights to build a Small House on their respective Lots of the Land, and the defendants were to empower Wah Hing to apply for all necessary building licences relating to the Development and all incidental applications, and further the defendants agreed to hold their respective Lots of the Land, to be purchased by Wah Hing and assigned to them at a “fictitious” consideration, in trust for Wah Hing.  In effect, Wah Hing alleged that the Agreement was for “purchase” of the defendants’ Ding Rights, or what was commonly called “套丁” or “買丁”.  Under the alleged Agreement, Wah Hing was to pay the defendants their Ding Fees by instalments until the Development was completed. 

82.  In their defence, the defendants denied the Agreement, and put Wah Hing to strict proof thereof.  At the trial, D3’s position was simply that there was no “sale” of his Ding Rights and that the Deed was only a joint development between him and/or the other defendants with Wah Hing.

83.  Further, in his closing submissions, D3 maintained and submitted that the arrangement the defendants had with Wah Hing was different from that of a “sale” of Ding Rights.  He had claimed it was the defendants who paid for rates for their respective lots, and they had not signed any assignments giving away their Ding Rights.   They bought their respective Lots on the Land, signed the Deed, and then authorized Wah Hing to build the Small Houses thereon, and upon completion and hand over of the Small Houses on their respective Lots by Wah Hing, they would pay all for the costs incurred by Wah Hing and its profits.  Further, D3 claimed that the defendants had all along agreed to comply with the terms of the Deed, and this was so even at the time of the trial[24].

84.  Wah Hing’s witness Chan attended trial and confirmed the contents of Chan’s affirmation.  Chan had said that he knew Wong and Lai and that they introduced to Wah Hing the Land for development, and that the defendants had agreed, for monetary consideration paid by Wah Hing, that Wah Hing was to have the power and right to apply for their respective Ding Rights, and the defendants empowered Wah Hing to apply for the Building Licenses by way of the P/A, and further, the parties then entered into the Deed.

85.  Chan also confirmed during the trial, the defendants never paid Wah Hing the Consideration stated in the assignment of their respective sections.

86.  Chan was mainly cross-examined by D3 as to why in 1995/1996 Wah Hing had suspended construction, and Chan was also asked about the incorrect delineations of the Lots/Small Houses on the site plan[25], which were respectively in relation to D1’s and D2’s Lots of the Land.  There were no questions or challenges to the other evidence as contained in Chan’s Affirmation.

87.  Wah Hing’s other witness Ning joined Wah Hing only in 1993 and whatever happened in 1992 or before she joined would not be within her personal knowledge, and the information she provided would be from documents produced by her on behalf of Wah Hing.  Ning adopted her two witness statements and she had also testified that the Consideration was never paid by any of the defendants, nor any construction or related costs.  The questions D3 asked of her was mostly on whether it was Wah Hing which had breached the terms of the Deed.

88.  Neither Chan nor Ning was really challenged as to their evidence about the Agreement, in particular that the defendants never paid for the Consideration for their Lots of the Land, which were bought, paid for, and built on by Wah Hing. 

89.  So far as D3 was concerned, there was no denial that he signed on the following receipts:

(i) Receipt dated 11 January 1995 for a cheque in the sum of HK$15,000 issued by Wah Hing, stated to be for the 2^nd instalment of payment for the purchase of Ding Rights, with a copy of Wah Hing’s cheque of the same date attached[26];

(ii) Receipt dated 5 September 1995 for a cheque in the sum of HK$5,000 issued by Wah Hing, stated to be for the 4^th instalment for payment for the purchase of Ding Rights, with a copy of Wah Hing’s cheque of the same date attached[27];

90.  D1 had signed on the following receipts :

(i) Receipt dated 29 January 1995 for HK$50,000 in cash from Mark Enterprise, stated to be for the 1^st instalment for the purchase of Ding Rights[28];

(ii) Receipt dated 11 January 1995 for a cheque in the sum of HK$15,000 issued by Wah Hing, stated to be for the 2^nd instalment for the purchase of the Ding Rights[29];

91.  D2 had also signed on one receipt, as follows:

(i) Receipt dated 29 January 1995 for HK$50,000 in cash from Mark Enterprise, stated to be for the 1^st instalment for the purchase of Ding Rights[30]

92.  It was thus clearly recorded on the above receipts the purpose of payments, and the defendants had acknowledged the same by signing on the same.  As Ning had pointed out, although the receipts for the 1^st and 3^rd instalments for D3 seemed to be missing, as D3 had acknowledged the above payments being the 2^nd and the 4^th instalments, he must have received the 1^st and 3^rd instalments.  I accept what she said.  D3’s explanation was that Wong had only told him that those were the 2^nd and 4^th instalments of payments for D3.  I do not find his explanation convincing.  D3 had produced neatly typed opening submissions and closing submissions, and he could clearly read and understand Chinese, and would understand what was typed on the receipts he had signed.  I find that D3 knew clearly what he was doing, and what he was signing. 

93.  So far as the Preliminary Agreements are concerned, only the ones signed by D1 and D2 had been produced[31].  The effect of the Preliminary Agreements was to give to Wah Hing full authorisation over all their rights and interests in the applications to build Small Houses, in return for “compensation” for their said rights and interests, and the “compensation” was to be paid, as to the 1^st payment, on signing of all relevant documents, and the final payment within 7 days of the granting of the Building Licence.

94.  Having considered the evidence before this court, I find that the defendants understood what they were doing, and in effect they had entered into the Agreement with Wah Hing to “purchase” their Ding Rights.  Wah Hing had proved its case, and I find that there was the Agreement between Wah Hing and the defendants as alleged by Wah Hing. 

Issue 2

95.  The defendants’ case as pleaded in their defence and counterclaim was that Wah Hing had made the Representations to them and that they relied on the Representations and further were induced to enter into Agreement and/or the Deed with Wah Hing.

96.  According to the defendants, Wah Hing sent its “representative” to visit the defendants in about April 1992 to discuss about the development of their Lots and they had told the representative that their Lots could not be developed into private residential units and could not be developed into transferred to any other party.  The defendants then said that Wah Hing had told them that the Hong Kong Government would allow building agreements to be made in contemplation of removing the restriction of alienation.  They agreed to co-operate with Wah Hing but stressed that the matter must be lawful.  It was under such circumstances that they relied on the Representations and were induced to enter into the Deed with Wah Hing.  

97.  D3 had confirmed during the trial Wah Hing’s “representative” referred by him in D3’s Affirmation was Wong, and thus it appeared to be the defendants’ case that the Representations were in fact de by Wong.

98.  Wah Hing had denied categorically that it had made any of the Representations, or there was any misrepresentation, on the part of the company.  Further, it was Wah Hing’s case that Wong was the defendants’ representative. 

99.  As mentioned earlier, Wong was a “middle man” and I find his role was rather unclear as it appears that he was both acting as the company’s representative, and also the representative of the 15 Villagers. In fact, it appears to this court that he was on the side of the defendants, as Wong was stated to be the contact person for D1 and D3 in the Cancellation Letter, and Wong was also to be the defendants’ witness and in fact gave a witness statement on their behalf. 

100.  In any event, Ning had given evidence that all communications or contact between Wah Hing and the defendants was through Wong and/or Lai, and that there was no direct contact between Wah Hing and the defendants at the time, and that she had never met the defendants at that time. There was no challenge by D3 to her evidence. 

101.  There was no reference by Wong that there was any of the Representations in his witness statement, and in any event, Wong had disappeared.

102.  I find there was no sufficient evidence that Wah Hing did make any of the Representations or there had been any misrepresentations on the part of Wah Hing.  There was further no sufficient evidence that any of the defendants were induced into entering into the Agreement and/or the Deed by reason of any of the Representations, or any misrepresentations.

Issue 3

103.  It was the defendants’ pleaded case that the Agreement and the Deed were in nature a building agreement which was prohibited under the Building Licence and thereby void or voidable.  I understand that their case was that the Agreement and the Deed were illegal.

104.  The Agreement followed by the execution of various documents, including the P/A and the Deed, and the payments to the defendants was in effect a “development scheme” as described in Best Sheen.  Following what was said by the then Yuen J in Best Sheen and the Le Pichon JA in Madam Chung, and also accepted by Mr Cheng, the kind of development scheme in the present case is illegal.

105.  In light of the above, the Agreement and the Deed would not be unenforceable.

Issue 4

106.  Recognizing the illegality, Mr Cheng referred to Best Sheen and submitted that Wah Hing did not have to rely on the Agreement or the Deed in asking this court to make a finding that Wah Hing had throughout retained the beneficial interest in the defendants’ Lots of the Land, as the defendants were/are in fact trustees for Wah Hing.

107.  Ning’s evidence showed that all payments for the purchase of the Land and the construction of the Small Houses, including any incidental or related expenses for “Fung Shui”, welfare etc were paid by Wah Hing, and the defendants never paid for the Consideration, or any construction or related costs, notwithstanding that the defendants had said they “purchased” their respective Lots.

108.  The only payments alleged to have been made by the defendants were rates for their respective Lots, but this seemed to be only raised by D3 during the trial, and there was no mention of this in D3’s Affirmation, or D1’s or D2’s Affirmations.  Under cross examination, D3 then said some of the rates were paid by him and some were paid by Wong.  When asked why he had paid the rates when he was not residing there, he said he did ask Wong, and was told by Wong that as the trial dates had been fixed, he could then suspend payments.  He then said he only had the latest rates payment receipt, and that all previous ones were with Wong.  However, Wong did not produce any of the rates demand notices or rates payment receipts in his witness statement.  

109.  I find that there was simply insufficient evidence that D3, or any of the defendants, had paid all the rates since the Assignment to them of their respective Lots by Wah Hing.

110.  In any event, in none of the defendants’ affirmations, they had stated they had paid the Consideration or any construction costs, nor did D3 mention this in his oral evidence.

111.  Finally, towards the end of the cross examination, Mr Cheng had put to D3 that he had agreed to hold the title of his Lot, namely Section E in trust for Wah Hing, and D3 unequivocally agreed.

112.  When D3 was given an opportunity to clarify his answers after cross-examination, he maintained he never sold his Ding Rights, and if he had indeed sold, then all he needed to do was to collect the money and left, and did not have to do anything, whereas, in the present case, he had to sign on the Building Licence and various documents.  However, this was what he had agreed to do under the Deed.

113.  The court had asked him again whether he agreed to hold the title in trust for Wah Hing, he then replied he never authorized Wah Hing, and that they were to co-operate in the Development, and appeared to be denying signing the P/A, and when the court referred him to the P/A and the Deed signed by his, he replied he thought he had cancelled them in 1996, as he thought he could unilaterally cancel the same.

114.  I find him evasive, and I do not find his answers satisfactory.  In any event, there was clearly no sufficient evidence produced by D3, or any of the other two defendants, that they had paid for the Consideration or any construction costs for the Small Houses on their Lots. 

115.  In light of the above, I accept the evidence of Chan and Ning and find that the 3 defendants never paid for the Consideration for their respective Lots of the Land, nor any of the construction costs for the Small Houses thereon.  The purchase price of the Land was paid by Wah Hing and also all construction and related costs of the Small Houses.

116.  Although in the present case, there was no evidence that the defendants had executed any actual declarations of trust in favour of Wah Hing as that in the case of Best Sheen, in view of my finding that none of the defendants had paid any of the Consideration, nor any of the construction costs of the Small Houses thereon, Wah Hing could rely on its beneficial interest under a resulting trust, which could be implied.  

117.  I therefore find that the defendants held/hold the beneficial interest in their respective Lots in trust for Wah Hing.

Issue 5

118.  The defendants’ alternative case was that Wah Hing’s conduct of breaching the Deed and/or the Building Licence was an unilateral repudiation of the Deed and the defendants accepted the repudiation.

119.  The breaches alleged by defendants as pleaded were as follows :

(i) Failing to pay the HK$230,000 as agreed under Clause 17 of  the Deed;

(ii) Failing to carry out the works and other terms under the Deed within a reasonable time;

(iii) Breaching the conditions in the Building Licenses and the Deed by parting with possession of their respective Lots of the Land to allow others to occupy the Small Houses thereon;

(iv) Breaching the Building Licence and the Deed by entering the Charge in favour of Panbillion on 22 April 1999.

Failure to pay HK$230,000

120.  Ning had said that during the trial that the HK$230,000 was stated to be a “deposit” under Clause 17 of the Deed, or “保證金”.  This was not a sum to be paid by Wah Hing in addition to the Ding Fees of HK$230,000.  As set out under Clause 19 of the Deed, after the issue of the Certificate, each of the 15 Villagers would be notified by Wah Hing, and each of them had the option to pay to Wah Hing the full market price of the Land and the Small House thereon less the amount of the deposit of HK$230,000, and also less the Consideration, but the 3 defendants did not turn up after being notified and then in 1999, the defendants issued a writ against Wah Hing.  Further according to Ning, so far as the others of the 15 Villagers were concerned, there were no problems.

121.  As for the Ding Fees paid by Wah Hing, this had been paid by Wah Hing to each of the 15 Villagers, and she had produced receipts in support of Wah Hing’s payments of HK$2,700,000 to Wong and Lai for the 15 Villagers’ Ding Fees, namely HK$180,000 each. 

122.  Ning further said another HK$150,000 had have been paid by Wah Hing to the 3 defendants, namely HK$50,000 each, and that would make a total of HK$230,000 for each defendant.

123.  There was no dispute that the Ding Fee for each of the defendant was HK$230,000.  Although in their witness statements, it had appeared that they were saying they did not receive the sum of HK$230,000 at all, it was clear from D3’s evidence that what was meant, at least for him, was that he did not receive the sum of HK$230,000 in full.  Under cross examination, D3 said he could not recall how much he had received, and he later said he should have received over HK$100,000.  His answer was vague.

124.  The receipts signed by the defendants showed:

D1

(i) 1^st instalment of Ding Fees of HK$50,000 cash from Wong on 29.01.92

(ii) 2^nd instalment of Ding Fees of HK$15,000 by cheque from Wah Hing on 11.01.95

D2

(i) 1^st instalment of Ding Fees of HK$50,000 cash from Wong on 29.01.92

(ii) HK$15,000 by cheque from Wah Hing on 28.10.95

(iii) HK$5,000 by cheque from Wah Hing on 28.10.95

D3

(i) 2^nd instalment of Ding Fees of HK$15,000 by cheque from Wah Hing on 11.01.95

(ii) 4^th instalment of Ding Fees of HK $5,000 by cheque from Wah Hing on 05.09.95

125.  Thus the receipts showed that D1 had received a total of HK$65,000, D2 had received a total of HK$70,000, and D3 received HK$20,000 direct from Wah Hing.  The total received by the 3 defendants was HK$155,000.  Ning had explained that as D3 was in England at the relevant time, what was paid to D1 and D2 had included D3’s share as well.

126.  The total sum paid to the defendants added up to HK $5,000 more than what Wah Hing said it paid to each of the defendants. There was no satisfactory explanation for this from Ning.   

127.  From the evidence, the main receipt missing would be that of D3 for the 1^st instalment of the Ding Fees of HK$50,000.  However, as I have said, since D3 signed receipts for the 2^nd and 4^th instalment, he should have received the 1^st and the 3^rd instalments as well. 

128.  I accept what Ning had said.  Had D3 not received the 1^st instalment of HK$50,000, as D1 and D2, I doubt very much that D3 would be prepared to sign the P/A and the Deed on the same day as D1 and D2. I find on a balance of probabilities that D3 also received the 1^st instalment of HK$50,000, although his Preliminary Agreement and receipt seem to have gone missing.

129.  The 17 receipts[32] signed by Wong and Lai for HK$2.7m  set out by Ning in her witness statements indicated that they received the amounts as “consultancy fees”, except two amounts of HK$200,000 each, one was said to be for “welfare”[33] and the other one for “fung shui”[34].  There were two further receipts signed by Lai for “consultancy fees”[35], amounting to HK$55,000 which seemed to have been omitted by Ning. According to Wah Hing’s own witness Chan, there seemed to have been paid to the village head for the entire village amounts for “welfare” and “fung shui”.  Even if those amounts for “welfare” or “fung shui” were to be excluded as Ding Fees, and only those for “consultancy fees” were to be taken into account, the “shortfall”, or amounts not supported by receipts, seemed to be only about HK$345,000, or about HK$ 23,000 each, out of the HK$180,000, or a total of HK$230,000.  Bearing in mind the lapse of time, I am of the view that the non availability of some receipts would be understandable.

130.  More importantly, it was the defendants who alleged breach and repudiation of the Deed on the part of Wah Hing, and apart from trying to call Wong as a witness, there was no other supporting evidence from the defendants themselves apart from a bare allegation of non payment of the sum of HK$230,000.  There was also no supporting evidence produced by the defendants to contradict what Ning had said in her witness statements or what the receipts showed.  In the circumstances, on a balance of probabilities, I do not find that there was sufficient evidence that Wah Hing had breached the Deed or that HK$230,000 had not been paid to each of the defendants.

131.  In any event, the Cancellation Letter was sent by D1 and D3 on 18 January 1996, and the power of attorney to Grand was executed by D2 and D3 on 14 June 1997.  So far as D1 was concerned, the Building Licence had not even been issued when he signed the Cancellation Letter, and for D2, his Building Licence had not been issued when he executed the power of attorney to Grand.  Thus, for D1 and D2, according to the Preliminary Agreements signed by them, the final payment of the HK$230,000 was not even due yet.

Failing to carry out the works and other terms within a reasonable time

132.  So far as the works were concerned, the defendants alleged that Wah Hing ran into financial difficulty and failed to pay its sub-contractors and work was suspended in about mid 1995.

133.  In D3’s Affirmation, the only alleged breach by Wah Hing referred therein was the company’s failure to pay him the sum of HK$230,000. This was the same in D1’s 2 Affirmation and D2’s Affirmation. There was no evidence about any other alleged breaches as pleaded in their defence.

134.  Chan was the supervisor at the construction site, and when cross examined by D3, Chan had explained that in 1995/1996, there were disputes between Wah Hing and Wong over the foundations,or “地脚”, and Wong then suspended work.

135.  Even when D3 gave oral evidence, his main complaints were that there were mistakes about the foundations constructed being mis-aligned, or “地脚不對位置”, which seemed to be in relation to D1’s and D2’s lots, and that those had to be removed and re-built.  There were then disagreements between Wah Hing and the contractor and as a result, construction works were suspended.

136.  First of all, there simply was no sufficient evidence that Wah Hing had already run into financial difficulty in 1995, or that it had failed to pay its sub-contractors in that year because of any financial difficulty. In fact, among those receipts produced by Ning, there were also payments in 1995 by Wah Hing to Wong himself in 1995, and the last payment to Wong in relation to the works of the Development seemed to be on 3 January 1996[36].

137.  In any event, the Building Licence for D3’s Lot was only issued on 14 September 1995, and the Building Licences to D1 and D2 were in fact later, respectively on 25 June 1997 and 8 March 1996.  As pointed out by Ning, Wah Hing would not have been able to start any actual construction of the Small House before the issue of the Building Licence.  According to the Building Licence, the construction of the Small House was to be completed within 3 years of the date of issue of that Building Licence.  Although the Building Licenses to the defendants were issued on different dates, it was accepted that the Certificates to all the defendants were issued on about the same date, ie 30 November 1999.  Save for D3, the construction on D1’s and D2’s Lots was completed within more or less the time stipulated within in the Building Licences.

138.  It appears from what D3 said during the trial, the errors over the D1’s and D2’s Lots could have caused some delay.  Even if this was the case, there was no sufficient evidence that such errors were not remedied within a reasonable time, or that Wah Hing had failed to carry out the construction works within a reasonable time.  There was certainly no evidence at all to support what the defendants alleged and pleaded, that there had been “repeated demands” by them to Wah Hing to carry out the works within a reasonable time.  In any event, I find that there was no sufficient evidence that Wah Hing did not carry out construction works within a reasonable time.

139.  The defendants had also alleged that Wah Hing had failed to comply with the necessary procedures in the District Lands Office.  It is not quite clear what they were referring to, since there was no evidence in any of their Affirmations.  Anyway, I find also there was no sufficient evidence to support this allegation of theirs.

Parting with possession of the Land to unknown persons

140.  Again, there was no evidence in any of the defendants’ Affirmations in relation to this allegation.

141.  During the trial, D3 told the court that he had been served with a writ issued on 12 September 2013 by a person called Lau Chau Yin Emily in the District Court (DCCJ 3552 of 2013)[37].  From this writ, it would appear that in about December 1998, Ms Lau and her husband at that time Mr To had entered into an agreement with a company Hilsen Limited, the property sales agent of Wah Hing, to purchase the 1^st floor of the Small House built on D3’s Lot E at the price of HK$1,090,000, and 30% of the purchase price had been paid by Ms Lau, but the title had never been transferred to her and/or Mr To.  Ms Lau claimed that as she had been in exclusive and continuous possession and occupation of the 1^st floor since around March 2000, she had been in adverse possession of that property against D3 or any one and she had acquired a good possessory title to that property.

142.  Upon enquiries from this court, Mr Cheng then took further instructions and clarified that at about end of 1998, Wah Hing had appointed Hilsen Limited as its sales agent to handle any sales after the issue of the Certificates in the event that any of the 15 Villagers failed to exercise their options to “buy” the Small Houses and the related lots from Wah Hing under the Deed.  Wah Hing understood that there was an agreement between Hilsen Limited and Ms Lau and/or Mr To, but according to what Mr Cheng told the court as to his instructions, it was not a sale and purchase agreement/assignment, and further Wah Hing had no knowledge as to what happened thereafter.

143.  What Mr Cheng told this court was of course not evidence before this court.  As it was the defendants’ case that Wah Hing had parted possession of their Lots, or to occupy their Lots, the burden of proof is on the defendants.  The defendants had chosen not even to update their own respective Affirmations by any supplemental witness statements notwithstanding being legally represented until the last minute, and further there was no other supporting evidence, I find that there was no sufficient evidence before this court that Wah Hing had parted with possession, or “sold”, the defendants’ Lots and Small Houses thereon in breach of the Agreement and/or the terms of the Deed.

144.  Even if Wah Hing had been in breach, the alleged breach, in so far which could been seen from the writ issued by Ms Lau took place in December 1998.  As mentioned earlier, the Cancellation Letter was, however, sent by D1 and D3 on 18 January 1996 and D2 and D3 executed the power of attorney with Grand on 14 June 1997, which were both before the alleged breach by Wah Hing. 

Executing the Charge in favour of Panbillion on 22 April 1999 

145.  It appeared that on 6 December 1996, Wah Hing had entered into a deed with a company called Fairpoint Limited as financier for credit facilities.  Then on 7 January 1998, Wah Nam entered into a loan agreement with Panbillion on 7 January 1998, which was later varied by a so called 6-party deed.  Both Fairpoint and Panbillion were subsidiaries of the China Insurance Group Investment Co Ltd.

146.  To cut the long story short, both Wah Hing and Wah Nam had defaulted under the above deeds and loan agreement, and as a result of the default of Wah Hing and Wah Nam, the 6 parties concerned entered into  a charge on 22 April 1999 (“Charge”).

147.  Under the Charge, Wah Hing had charged and assigned any of its present and future rights titles interests benefits and claims in, among other things, the Land and the Small Houses erected thereon, and the Deeds.  Further, Wah Hing had presented and warranted under the Charge that the Deeds were valid, legal and enforceable and subsisting according to the laws of Hong Kong, and also at the time of the Charge, they had not sold, transferred, created any encumbrances over the Land and Small Houses thereon.

148.  Wah Hing denied it was in breach of the Building Licence and the Deed by entering into the Charge.

149.  Even if it had, as mentioned earlier, this alleged breach would be long after the Cancellation Letter and the power of attorney to Grand.

Conclusion

150.  I have found that the Agreement and/or the Deed illegal and unenforceable.  In the alternative, I find that there had been no breaches by Wah Hing of Agreement and/or the Deed, or even if there had, they were after the Cancellation Letter and/or the power of attorney by the defendants to Grand, and there was no repudiation by Wah Hing prior thereto.

151.  Further Clause 22 of the P/A[38] provided that “the donor shall not revoke these presents without the prior consent in writing of the done, and that the donor hereby further declares that these presents shall continue in full force and effect until written notice of revocation hereby signed by the donor shall be actually received by the done”.

152.  Thus, revocation of the power of attorney was only possible with the prior consent in writing of Wah Hing, and there was clearly no evidence of Wah Hing consenting to any revocation by the defendants.

153.  Also, under Clause 24 of the P/A[39], it was stipulated that  “The donor hereby expressly undertakes that so long as the P/A remains in full force and effect, the donor shall not create any further or other power of attorney in respect of or in relation to … in favour of any person or firm or corporation”.  

154.  It is clear from the above that the defendants were in breach of the terms of the P/A.

155.  In any event, I have found that the defendants did not need to relay on the Agreement and/or the Deed in seeking their reliefs, and that I have found that the defendants were/are holding the respective Lots in the Land registered in their names in trust for Wah Hing.  In light of what I have said above, I am of the view that Wah Hing is entitled to the reliefs as sought.

156.  So far as the defendants’ counterclaim is concerned, in view of my finding that the Agreement and/or Deed was illegal, I am prepared to make a declaration that the Deed was unenforceable and the registration of the Deed in the Land Registry should thus be vacated.  They also sought a declaration that the defendants were/are the rightful owner of their respective Lots.  In view of my earlier findings that they were only trustees, they are not entitled to this declaration.

Order

157.  My order is as follows:

(i) A declaration that the power of attorney granted to Grand Plaza Development Limited on about 14 June 1997 by the defendants in HCA 16690/00, 16692/99, 16693/99 is void;

(ii) The defendants in HCA 16690/99, 16692/99, 16693/99 shall refrain from granting any power of attorney to any one without the prior written consent of the plaintiff.

(iii) The Deed of Development dated 13 April 1992 is illegal and unenforceable, and its registration in the Yuen Long New Territories Land Registry should be vacated.

158.  So far as costs are concerned, as both sides have succeeded in part of their reliefs sought, I will make no order as to costs in each of HCA 16690/99, 16692/99, 16693/99.  This is an order nisi, which shall be made final after 21 days.