LIU HON WONG AND OTHERS v. LIU CHEE KWAN AND ANOTHER

HCA 953/2017

[2023] HKCFI 1658

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 953 OF 2017

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  This is a case concerning Liu Wing Sing Tong (廖允升堂) (“LWST”), and some matters between some plaintiffs (ie the 1^st to the 3^rd plaintiffs) on the one hand and the 1^st defendant on the other hand. For ease of reference, in this judgment, the plaintiffs are referred to as “P1” to “P5” respectively, and “Ps” collectively. The defendants are referred to as “D1” and “D2” respectively, and “Ds” collectively. All the parties (except P3) are members of the Liu’s clan (“Liu’s Clan”). The relationships among the individuals in Liu’s Clan, as well as the various tsos and tongs within the clan, are shown in the agreed family tree (“the Agreed Family Tree”) annexed to this judgment.

2.  At the material times, D1 and D2 were and are the managers of LWST.[1]

3.  Ps’ case can be divided into 3 parts:

(1) Part I is the claim made by P1, P2 and P3 against D1 in respect of some matters concerning Lot 415 in DD87 (“Lot 415”).

(2) Part II is the claim made by P1, P2, P4 and P5 against D1 with regard to some ding payments (丁口錢) (“Ding Payments”) from Liu Sam Chuk Tso (廖三祝祖) (“LSCT”).

(3) Part III is the claim made by P1 and P2 against Ds with regard to various matters concerning LWST, ie the alleged failure of providing documents of LWST by the managers, letting out the properties of LWST at undervalue, the alleged failure to pay rates by the managers, and the alleged invalid resolution (“the 2017 Resolution”) passed in the general meeting of LWST held on 20 May 2017 (“the May 2017 Meeting”) for the payment of Ds’ legal fees in this action.

All these claims are contested and denied by Ds.

4.  In the pre-trial review (“the PTR”)[2] and the trial, Ps are represented by Mr Ian Chau, and Ds are represented by Mr Francis Yip and Mr James Wong.

5.  The trial began on 15 November 2022 and continued until 21 November 2022. In the early morning on 21 November 2022, I received an email from Mr Chau, by which Mr Chau informed the court that he was physically unwell and was tested Covid positive the previous night, hence he was unable to continue to attend the trial. After hearing Mr Yip and consulting counsel’s diaries, I adjourned the trial to 27 March 2023. Counsel have agreed that in respect of the costs of the hearing on 21 November 2022, there be no order as to costs. I must say that this is a very sensible and reasonable agreement. I would accede to this request.

B. THE PARTIES’ RESPECTIVE CASES

B1. Ps’ case

B1.1 Part I

6.  P1, P2 and P3’s case is that when Liu Hon Fan alias Liu Kit Tseung (廖翰芬) (“Hon Fan”) passed away on 1 September 1955, his five sons, including, P1 and Liu Hon Kee (廖漢基), each became the head of a family. P2 is the son of the late Liu Hon Kee. P4 is the son of P1. P5 is the son of P2. Ps call the 5 families originated from Hon Fan as the “5 Fongs”.

7.  Various pieces of land were owned by Hon Fan (“Hon Fan’s Lands”) during his lifetime. These included Lot 415. After Hon Fan’s death, Lot 415 was succeeded in November 1956 by the 5 sons of Hon Fan. The current registered owners of Lot 415 are P1 and others, including P3 and D1.

8.  P1, P2 and P3’s case is that D1 was and is an “Agent/Trustee/Helper”, responsible for managing Hon Fan’s Lands including Lot 415.

9.  The alleged “Agent/Trustee/Helper” role of D1 is an important part of Ps’ case. The alleged “Agent/Trustee/Helper” role of D1 as pleaded in the Re-Amended Statement of Claim is as follows:

“14. Since [Hon Fan]’s death until 1992, the custom and practice of:

(a) all the heads of the 5 Fongs from time to time and the registered owners (or co-owners) from time to time of Hon Fan’s land was that Liu Hon Yin acted as an agent and trustee of the heads of the 5 Fongs and the registered owners (or co-owners) (a) managing all of [Hon Fan’s Lands], including but not limited to looking after the landed properties, leasing out the landed properties, and collecting rent and other incomes of the landed properties; and (b) annually, distributing any aggregate profits for that year (calculated by aggregating income and expenses for that year) arising from [Hon Fan’s Lands] to the heads of the 5 Fongs with each head of Fong receiving a 1/5 share of such profits for the benefit of his Fong; and

(b) all the heads of the 5 Fongs from time to time and members of their Fongs from time to time was that Liu Hon Yin acted as an agent and trustee collecting on behalf of and distributing to such heads of the 5 Fongs the shares of incomes from Tongs and Tsos which the heads of the 5 Fongs were entitled to receive on behalf of themselves and members of their Fongs.

15. The role set out at §14 hereof will be referred to herein as “the Agent/Trustee/Helper”.

16. After the death of Liu Hon Yin, it was the custom and practice of all the heads of the 5 Fongs from time to time and members of their Fongs from time to time and the registered owners (or co-owners) (“the Registered Land Owners”) from time to time of Hon Fan’s land that:

(a) from 1992 to 1997 (inclusive), [D1] succeeded Liu Hon Yin’s role as the Agent/Trustee/Helper;

(b) from 1998 to 2002 (inclusive), Mr. Liu Chi Chun Eric acted Agent/Trustee/Helper; and

(c) from 2003 onwards, [D1] has again acted as Agent/Trustee/Helper.”

10.  P1, P2 and P3 claim that, D1, in breach of his duties as Agent/Trustee/Helper allowed unlawful occupiers to occupy and use Lot 415 (“the Unlawful Occupation Event”), thus causing loss and damage to them.

11.  Regarding the Unlawful Occupation Event, P1, P2 and P3 make the following claims against D1:

(1) In the 2014 Accounts of the 5 Fongs, there were deductions totaling HK$293,850 for construction works, stated to be regarding Lot 415. These are the costs claimed by D1 for reinstating Lot 415 after the Unlawful Occupation Event. Since the Unlawful Occupation Event was caused by D1’s breach of the obligations owed to the 5 Fongs, D1 should not be entitled to have any reimbursement from the funds of the 5 Fongs.[3]

(2) In the 2012 Accounts, there was an item of expenses in the sum of HK$115,000, which was claimed to be a fine and legal fee in respect of Lot 415, for Liu Chi Tai (廖滋泰) and Liu Chi Kai (廖滋啓). Further, in the 2014 Accounts, there was an item of expenses in the sum of HK$360,000 for fines in STS12397-12404 of 2013, and HK$12,000 in legal fees. All these sums are related to the prosecutions by the Government caused by the Unlawful Occupation Event. Since the Unlawful Occupation Event was caused by D1’s breach of his obligations owed to the 5 Fongs, these sums should be personally borne by D1 and not by the 5 Fongs.[4]

(3) The total of the aforesaid amounts is HK$780,850. P1 and P2 say that each of them is entitled to have 1/5 of that sum, ie HK$780,850 x 1/5 = HK$156,170.[5]

(4) P1 and P3 commenced HCA 313/2014 in early 2014 to evict the unlawful occupiers and incurred HK$129,106.60 as a result. Each of them should be reimbursed by D1 half of that sum, ie HK$129,106.60 x ½ = HK$64,553.30.[6]

B1.2 Part II

12.  The claim made in this part is a claim made by P1, P2, P4 and P5. They all claim that as living male descendants in the Liu’s Clan, they are entitled to have some Ding Payments.

13.  Ps’ case is that as the “Agent/Trustee/Helper”, D1 is responsible for, inter alia, collecting and distributing surplus money from rents received by LSCT to the heads of the 5 Fongs. However, D1, in breach of the duties as Agent/Trustee/Helper, has failed to distribute the Ding Payments to Ps (except P3).

14.  It is pleaded in the Re-Amended Statement of Claim:

“29. From 1992 to 1997 (inclusive) and from 2003 onwards, the custom and practice of the heads of the 5 Fongs and members of their Fongs was that [D1] - in his capacity as Agent/Trustee/Helper - would collect from Liu Sam Chuk Tso ( 廖三祝祖) all annual payments to which members of the 5 Fongs were entitled for distribution among the heads of the 5 Fongs (who were entitled to receive the distribution on behalf of themselves and members of their respective Fongs).

30. In accordance with tradition and custom, on an annual basis, if Liu Sam Chuk Tso has surplus money after deducting the expenses from the rents received, 70% of such surplus money would be distributed, as “Ding payments” (“丁口錢”) ( “ Ding Payments”), equally among all members of [LSCT], irrespective of which family they belonged to.

31. [P1, P2, P4, and P5] were at all material times entitled to receive Ding Payments from [LSCT].

32. It was also the custom that a head of a Fong would be entitled to receive Ding Payments on his own behalf as well as on behalf of their sons and/or grandsons.

33. Any Ding Payments received by [D1] on behalf of [P1, P2, P4, and P5] were at all material times and are held by [D1], by virtue of his role as Agent/Helper/Trustee, as a trustee of [P1, P2, P4, and P5] respectively.”

B1.3 Part III

15.  P1 and P2 claim that Ds, as managers of LWST, had let out the following properties of the tong (“the Properties”) at undervalue (“the Alleged Letting Out at Undervalue”), thereby causing loss to Ps:

(1) Lot No. 369 in DD 51 (“the 1^st Property”)

(2) Shop on Ground Floor (comprising the Front Portion and Rear Portion) and Cockloft, No. 45 San Fung Avenue, Sheung Shui, New Territories (“the 2^nd Property”)

(3) Shop on Ground Floor and Cockloft, No. 20 San Hong Street, Sheung Shui, New Territories (“the 3^rd Property”).

16.  Details of the claim based upon letting out the Properties at undervalue as pleaded in the Re-Amended Statement of Claim are as follows:

“[Ds’] Letting of Properties at Undervalue

40. In breach of their duties mentioned in paragraphs 21(a), (b), (c) and/or (f) hereof, at least since 2012 [Ds] have been letting out the Properties at gross undervalue.

PARTICULARS
(a)	In 2013, the monthly rental amount received by [Ds] as managers of [LWST] and the market rent as at 31 December 2013 as assessed by [Ps]’ surveyor are tabulated as follows:-   Monthly Rent Received Market Rent (2013) 1st Property $250 $17,100 2nd Property (Front Portion) (Rear Portion) (Cockloft) $20,000 $4,500 $4,800 $73,000 3rd Property $36,000 $74,000
(b)	Upon confrontation by members of [LWST] regarding the low rental income received, [Ds] thereafter uplifted the amounts of rent in respect of the 2nd Property (Front Portion) and the 3rd Property in 2014, while the 1st Property remained rented out at gross undervalue.
(c)	In 2014, the monthly rental amount received in respect of the Properties are as follows:-   Monthly Rent Received Market Rent (2013) 1st Property $250 $17,100 2nd Property (Front Portion) (Rear Portion) (Cockloft)   $50,000 $4,500 $4,800 (Jan - Jun) $6,800 (Jul - Dec) $73,000 3rd Property $75,000 $74,000
(d)	During the Members’ Meeting held on 30 December 2013, confronted with members’ questions as to why the 2nd Property (Front Portion) was still let out at the monthly rent of $20,000 which was far below market rent, [D1] merely replied that the existing lease would expire on 31 December 2013 and he would thereafter put the property on market for leasing at $50,000 per month. When a member Liu Tim Man offered to rent the 2nd Property (Front Portion) at $60,000 per month, [D1] refused and insisted that the 2nd Property (Front Portion) be put on market for leasing at $50,000 per month without providing any reasonable explanation thereof. Property Lease Period Monthly Rent (HKD) Market Rent (2013) (HKD) 1st Property 1/4/2013 to 31/3/2015 250 17,100 1/4/2015 to 31/3/2017 1,000 1/4/2017 to 31/3/2019 4,000 2nd Property (Front Portion) 1/1/2011 to 31/12/2013 20,000 73,000 8/2/2014 to 7/2/2017 50,000 25/3/2016 to 31/3/2019 45,000 2nd Property (Rear Portion) 1/12/2011 to 31/10/2015 4,500 1/12/2015 to 31/12/2018 7,500 2nd Property (Cockloft) 1/7/2012 to 30/6/2014 4,800 1/7/2014 to 30/6/2016 6,800 1/1/2017 to 30/12/2019 7,500 3rd Property 1/1/2011 to 31/12/2013 36,000 74,000 1/1/2014 to 31/12/2015 75,000 1/1/2016 to 31/12/2017 75,000 1/2/2018 to 31/1/2022 132,000
(f)	As at [the date of the Amended Statement of Claim, ie 30 October 2018], the Properties are still being let out below market rent and [P1 and/or P2] continue to suffer loss and damage. [P1 and/or P2] will only be able to provide further particulars of loss and damage upon seeking discovery from [Ds], and the adducing of expert evidence.”

17.  Another claim by P1 and P2 against Ds is that Ds have failed to pay rates for various landed properties of LWST when those rates fell due, and thereby have caused loss to Ps. The claim as pleaded in the Re-Amended Statement of Claim is as follows:

“[Ds’] Failure to Pay Rates

41. In breach of their duties … [Ds] failed to pay rates in respect of various landed properties of [LWST] when they fell due, wrongfully reimbursed themselves, and thereby caused [LWST] and its members to suffer loss and damage.

PARTICULARS

(a) Due to [Ds’] failure to pay rates in respect of various landed properties of [LWST] for various periods upon demand, the Government commenced legal proceedings DCMP 2417 of 2006 and DCMP 614 of 2013 and obtained judgments against [Ds].

(b) As to DCMP 2417 of 2006, [Ds] were liable for the judgment debt (i.e. the outstanding rates) of $57,392.60, in addition to court costs of $1,210, interest of $33,835.91, and costs and interest in respect of a charging order of $9,527.46.

(c) As to DCMP 614 of 2013, [Ds] were liable for the judgment debt (i.e. the outstanding rates) of $56,222.90, in addition to court costs of $1,270, interest of $35,858.60, and costs and interest in respect of a charging order of $7,723.07.

(d) The total amount of court costs and interest resulting from the proceedings is … $89,425.04.

(e) The said sum of $89,425.04 was the loss caused by the failure of [Ds] to discharge their duties as managers and should not therefore be deducted from the income of the Tong which its members are entitled to.

(f) The 2013 and 2016 accounting statements of [LWST] record that [Ds] have wrongfully deducted sums of HK$1,667, HK$111,450 and HK$99,408 from [LWST] funds, in relation to DCMP 2417 of 2006 and DCMP 614 of 2013. However, the precise basis and amount of the deductions is not clear from such accounting statements.”

18.  Further, P1 and P2 claim that the 2017 Resolution, passed by the members of LWST present in the May 2017 Meeting, is invalid. The basis of the claim as pleaded in the Re-Amended Statement of Claim is as follows:

“[Ds’] Holding of Meeting to Purportedly Authorise Legal Fees

42. By a notice dated 13 May 2017 (“the Notice”), [Ds], in their capacities as managers of [LWST], called for an extraordinary members’ meeting of [LWST] to be held on 20 May 2017 …

43. The agenda as stated in the Notice was limited to:

(a) The tenancy affairs of [LWST]; and

(b) Other matters.

44. In the 20.5.2017 Meeting, which was attended by some members of [LWST]:

(a) [Ds] stated that an action in the High Court (i.e. the present proceedings) was commenced because the 1st and 2nd Plaintiffs thought they suffered loss because the government fined [LWST], which was caused by the failure to pay rates, and wanted [LWST] to make compensation;

(b) [Ds] briefly mentioned the rental of the 2^nd Property (Front Portion) and the provision of accounting documents;

(c) [D1] indicated that solicitors’ fees and counsel’s fees had to be incurred for the action and asked members of [LWST] present at the 20.5.2017 Meeting to agree that [LWST] would pay legal costs;

(d) Members of [LWST] present at the 20.5.2017 Meeting were requested to sign a document authorizing [Ds] to engage lawyers to defend the action and incur legal costs;

(e) Some but not all members of [LWST] present at the 20.5.2017 Meeting signed such a document (“the Purported Authorization Document”); and

(f) There was no mention that the action contains claims against [D1] in respect of his breach of duties as Agent/Trustee/Helper in the management of landed properties belonging to the 5 Fongs, which are wholly irrelevant to, and the associated legal costs thereof should not be borne by, [LWST].

45. There was never at any material time, whether by the Purported Authorization Document or otherwise, any valid authorization for any of [Ds’] legal fees, whether for this action or otherwise, to be paid out of or reimbursed from [LWST]’s funds (“Valid Authorization”).

46. In particular, the Purported Authorization Document and/or the 20.5.2017 Meeting does not constitute any Valid Authorization:

(a) The agenda in the Notice fails to give any or any sufficient notice regarding authorization for any of [Ds’] legal fees, whether for this action or otherwise, to be paid out of or reimbursed from [LWST]’s funds.

(b) [Ds] did not make adequate disclosure of the matters in this action. Paragraphs 42-44 hereof are repeated.

(c) The members of [LWST] who did sign the Purported Authorization Document did not amount to even a majority, let alone an unanimity, of members, and therefore could not have provided Valid Authorization.

(d) [Ds] merely posted up the Notice on the notice board in the village without taking adequate steps to ensure that each and every member (including those residing outside Hong Kong) would become aware of the 20.5.2017 Meeting. [P1 and P2] did not receive any notice from [Ds] regarding the 20.5.2017 Meeting.

47. Insofar as any of [Ds’] legal fees for this action or otherwise have been paid out of or reimbursed from [LWST]’s funds, such payment out or reimbursement is unauthorized and unlawful, and [Ds] are liable to make compensation.”

19.  P1 and P2 further claim that Ds have failed to provide documents of LWST to them for inspection. The claim as pleaded in the Re-Amended Statement of Claim is as follows:

“[Ds’] Failure to Provide [LWST] Documents

39. In breach of their duties mentioned in paragraphs 21(d) and, (e) and/or (g) hereof, despite repeated requests and demands, [Ds] have failed to render proper accounts and/or provide proper information regarding administration of [LWST] to the members, including but not limited to bank statements, tenancy agreements and documents relating to the income and expenditure of the Tong.

PARTICULARS

(a) By a notice dated 23 December 2014 posted up on the notice board at various locations of Po Sheung Tsuen where [Ds] lived, [P1] as a member of [LWST] requested [Ds] to provide copies of all tenancy agreements, bank statements and documents relating to the income and expenditure of [LWST] for the years of 2012, 2013 and 2014 for inspection during the meeting of [LWST] to be held on 31 December 2014.

(b) During the meeting of [LWST] held on 31 December 2014, [Ds] only provided some tenancy agreements in respect of properties in Po Sheung Tsuen for inspection while tenancy agreements in respect of properties in Shek Wo Hui and other documents including bank statements and documents relating to the income and expenditure of [LWST] were not made available for inspection.

(c) By a notice dated 28 March 2015 posted up on notice board at various locations in Po Sheung Tsuen where [Ds] lived, [P1] put on record that [Ds] did not make available all documents requested for inspection during the last meeting and demanded [Ds] to provide all documents requested for inspection in the meeting of [LWST] to be held on 5 April 2015.

(d) During the meeting held on 5 April 2015, [Ds] failed and/or refused to comply with the requests and demands made in the notice dated 28 March 2015.

(e) By a notice dated 22 December 2016 posted up on notice board at various locations of Po Sheung Tsuen where [Ds] lived, [P1] requested and demanded [Ds] to provide copies of all tenancy agreements, bank statements, documents relating to the income and expenditure of [LWST] and records relating to sale and purchase of stocks for the years 2012, 2013, 2014, 2015 and 2016 for inspection during the meeting to be held on 31 December 2016.

(f) During the meeting of [LWST] held on 31 December 2016, [Ds] only produced some bank books for inspection.

(g) By a letter dated 16 February 2015 from Messrs. Wong, Hui & Co [“WH”], Solicitors for [P1 and P2] to [D1], [WH] requested for copies of all tenancy agreements in respect of the 2^nd Property and the 3^rd Property for the years 2012, 2013 and 2014.

(h) [D1] did not at the time comply with the requests and demands made by [WH] in its letter dated 16 February 2015.

(i) By 2 letters dated 13 February 2017 from [WH] separately addressed to [D1] and [D2] respectively, [WH] requested each of them to produce all tenancy agreements, bank statements and documents relating to the income and expenditure of [LWST] for the years from 2012 to 2016 within 14 days.

(j) None of [Ds] fully complied with the requests and demands made by [WH] in its letter dated 13 February 2017.”

20.  P1 and P2 claim that as a result of the breaches of trust and/or fiduciary duties as pleaded in the Re-Amended Statement of Claim, Ds are liable to pay compensation to LWST. P1 and P2 are each entitled to 1/20 of the compensation paid by Ds to LWST. The matters pleaded in the Re-Amended Statement of Claim are as follows:

“48. By reason of [Ds’] breaches of trust and/or fiduciary duty pleaded above, Ps have suffered loss and damage.

49. The custom of [LWST] is that as long as there is an annual surplus after expenses are deducted from income, the surplus would be distributed that year. [P1 and P2] are each entitled to a 1/20 share of such distribution.

50. [P1 and P2] are therefore each entitled to a 1/20 share for compensation of any loss caused by [Ds] to the assets of [LWST].”

21.  In reply to the enquiry made by the court, Mr Chau has confirmed that these proceedings are not representative proceedings under Order 15 rule 12 of the Rules of the High Court. Each plaintiff is suing in their personal capacity and is not representing anyone else. In the circumstances, only Ps and Ds are parties in these proceedings. No other member of LWST, and no other individual or institution as shown in the Agreed Family Tree (including LWST), is a party in these proceedings.

22.  In the trial, P1, P2 and P4 have given evidence in support of Ps’ case. Ps have also called Mr Tse Hing Tung (“Tse”) to give evidence. Tse was the clerk responsible for serving legal documents on the occupiers of Lot 415 in the legal proceedings commenced by P1 and P3 (ie HCA 313/2014) to evict those occupiers from the land.

B2. Ds’ Case

23.  As to the alleged role of “Agent/Trustee/Helper” of D1, D1’s pleaded case as set out in the Re-Amended Defence is as follows:

“14. …

(a) It is denied that Liu Hon Yin or a member of his Fong was responsible for managing and collecting rent and income from the land properties passed on by Liu Kit Tseung to his 5 Fongs.

(b) It is averred that, for convenience, and as agreed and consented to by all members of the 5 Fongs (including the Plaintiff) all along, that the practice has been that one person (“the helper of the 5 Fongs”) amongst the members of the 5 Fongs would collect the rent/income and take care of the management of the 15 landed properties (“the 15 Units”) referred to in the Schedule annexed hereto and be given 10%, after defraying expenses, of the income for his trouble and efforts, and then distribute the net income to the 5 Fongs.

(c) There is no formal election or appointment of the helper of the 5 Fongs. Liu Hon Yin, Liu Chi Chun Eric and [D1] had been the helper of the 5 Fongs for different periods. There was and is no rule as to who is qualified to be the helper. It depended and depends on who of the members of the 5 Fongs are willing to spend the time and efforts and who are respected and trusted and thus consented to by the other members. Further, since all the other Fongs except Liu Hon Yin’s Fong had emigrated, it has been agreed and the practice for decades has been that one member of Liu Hon Yin’s Fong would be the helper.

(d) It is averred that the management of and collection of rent from land passed on by [Hon Fan] to his 5 Fongs does not include landed properties other than the 15 Units, in particular, not including Lot 415, a piece of agricultural land.

(e) Further, members of the 5 Fongs, by virtue of their being male descendants of [Hon Fan], have been members of [LWST and Liu I Mou Tong] since they were born. Distributions from the said 2 Tongs were all along per stirpes and therefore, for convenience, the distributions for all 5 Fongs were given to one member of the 5 Fongs for his distribution amongst the members of the 5 Fongs. Thus the distributions were given to the helper of the 5 Fongs (as he was handling the aforesaid income for the 5 sons/members of the 5 Fongs already) for convenience for his distribution to the members of the 5 Fongs. If any of the 5 sons were still alive, the distributions from the 2 Tongs would be given by the helper of the 5 Fongs to him as the head of his Fong for him to distribute amongst members of his own Fong.”

24.  In other words, D1’s case is not he was not responsible for the care and management of Lot 415. D1 denies that he has any duty in relation to Lot 415 as alleged by P1, P2 and P3. D1’s case is that he is merely a co-owner of Lot 415. His rights and obligations in relation to Lot 415 would be same as those of the other co-owners of the land. D1 also claims that it would be unnecessary for P1 and P3 to commence HCA 313/2014 to recover possession of Lot 415. In the Re-Amended Defence, it is pleaded:

“23. …… it is denied that [D1] was responsible for the care and management of Lot 415. Further, at the time [P1 and P3] commenced the action in HCA 313/2014 in February 2014, Lot 415 had already been fenced off by [D1] and his brothers and no one physically occupied Lot 415. The institution of legal proceedings in HCA 313/2014 was therefore unnecessary.”

25.  D1 also denies that he has failed to distribute any Ding Payment to P1, P2, P4 and P5.

26.  Regarding the Alleged Letting Out at Undervalue, Ds pleaded the following in the Re-Amended Defence:

“43. As to paragraph 40, it is averred that:-

(a) The 1^st Property is a piece of agricultural land. The suggested rental of $17,000.00 per month was not the then prevailing market rent for the 1^st Property.

(b) Before renewal of leases for the 1^st, 2^nd and 3^rd Properties, [Ds] would consult local estate agents on the market rentals of similar properties in the vicinity.

(c) [Ds] would adopt the comparables given by local estate agents to enter into bargain with the tenants and arrive at new rentals of new tenancy agreements for the 1^st, 2^nd and 3^rd Properties.

(d) The market rentals for shops in Sheung Shui surged sharply in or about the end of 2013 when parallel trade flourished in Sheung Shui area.

(e) The prior tenancy agreements for the 2^nd and the 3^rd Properties expired at the end of 2013. Therefore, the monthly rents fixed by the tenancy agreements could not be changed before they expired. When the tenancy agreements expired by the end of 2013, the new tenancy agreements for the 2^nd and 3^rd properties were entered at market rentals.

(f) Liu Tim Man did not make the offer as alleged … Instead [D2] told Liu Tim Man that the market rental was, according to estate agent, $50,000.00 per month. When [D2] offered to let the 2^nd Property to Liu Tim Man at $50,000.00 per month allowing him to sub-let the 2^nd Property at higher price, Liu Tim Man rejected the offer.

(g) Paragraph 40(e) is admitted.

(h) Save as aforesaid, paragraph 40 is denied.”

27.  Ds deny that they are liable in respect of the failure to pay rates. Ds pleaded the following in the Re-Amended Defence:

“44. As to paragraph 41, it is averred that:-

(a) At the material time, there was a widespread and concerted movement among indigenous villagers to fight for rates exemption after 1997 in order to protect their lawful and traditional rights and interests.

(b) In meetings of members of [LWST], it was agreed by members to withhold payment of rates pending negotiation with the Government which if successful would bring long term benefit to indigenous villagers as a whole and to members of [LWST] in particular.

(c) [Liu Tsun Ka], the treasurer engaged lawyers to negotiate with the Government. The negotiation with the Government failed in the end. The Government claimed against [LWST] for payment of outstanding rates by legal action.

(d) In a special meeting of members of [LWST] held on 20^th May 2017, members agreed, inter alia, that the legal costs incurred in DCMP 2417/2016 and DCMP 614/2013 and fines imposed by Government in relation to late payment of rate should be paid by [LWST].

(e) The annual general meeting of [LWST] is held on the 31^st December each year. Interested members can attend the annual general meeting. Members who attend the meeting will also look after the interest of their own fongs.

(f) In the annual general meeting of Liu Wing Sing Tong held on 31^st December 2018, members agreed, inter alia, that the legal costs incurred in legal action and fines imposed by Government in relation to late payment of rates should be paid by [LWST].

(g) In the premises, the postponement of payment of rates was at the material time agreed or alternatively subsequently ratified by members of [LWST].

(h) Save as aforesaid, paragraph 41 is denied.”

28.  In Ds’ further and better particulars (“Ds’ FBP”), it is pleaded that members of LWST agreed that LWST should pay for the interest and/or costs in relation to the failure to pay rates, in meetings held on 31 December 2013 (“the 2013 Meeting”); 31 December 2016 (“the 2016 Meeting”); 20 May 2017 (ie the May 2017 Meeting); and 31 December 2018 (“the 2018 Meeting”).[7]

29.  As to the alleged invalidity of the 2017 Resolution, Ps’ claim is not admitted by Ds.

30.  In relation to the alleged failure of producing documents, Ds pleaded the following in the Re-Amended Defence:

“42. As to paragraph 39, it is further averred that:-

(a) Members meeting of [LWST] is held on the 31^st day of December each year.

(b) During the meeting of members of [LWST] in 2014, [P4] asked whether tenancy agreements (but not bank statements or income documents) were available for inspection.

(c) [Ds] produced tenancy agreements for inspection. Members were allowed to take photographs of the same. It was made clear by [Ds] that if members wanted to inspect further documents they could contact the treasurers.

(d) 5^th April 2015 was the Ching Ming Festival but not a meeting of [LWST].

(e) Notice dated 22nd December 2016 was posted up in Po Sheung Tsuen.

(f) During the meeting of [LWST] in 2016, [Ds] produced saving passbook of [LWST], saving account being its only bank account, stocks monthly statements and the latest tenancy agreements of [LWST]. [P4] even took photographs thereof.

(g) [Ds] received the letters dated 16th February 2015 and 2 letters dated 13th February 2017 from [WH].

(h) Save aforesaid, paragraph 39 is not admitted.”

31.  The custom of LWST as pleaded in [49] of the Re-Amended Statement of Claim is admitted by Ds.[8] However, Ds deny that Ps are entitled to have any compensation.

32.  Ds also rely upon limitation defence. The limitation defence as pleaded in the Re-Amended Defence is as follows:

“52. Further or alternatively, by reason of the aforesaid, the Plaintiffs’ right to bring an action for (a) accounts including but not limited to an account as to Ding Payments before 2011; (b) any sum, which is denied, due on taking the said accounts; and (c) compensation or damages was and is barred by sections 4 and 20 of the Limitation Ordinance, Cap. 347, Laws of Hong Kong, more than 6 years having elapsed before the commencement of the present action.”

33.  D1 and D2, and the two treasurers of LWST, namely (a) Liu Tsun Ka (廖進家) (“TK”), and (b) Liu Chi Fai (廖志輝) (“CF”), have given evidence in the trial in support of Ds’ case.

C. THE JOINT STATEMENT OF ISSUES

34.  Counsel have prepared a joint statement of issues (“the Joint Statement of Issues”). As per that statement, the agreed issues to be resolved in the trial (“the Agreed Issues”) are as follows[9]:

(1) Whether D1 acted as the Agent/Trustee/Helper (having regard to the custom and practice of the 5 Fongs in respect of the Agent/Trustee/Helper) and was subject its various duties as contended by Ps;

(2) Whether D1 had allowed and suffered unlawful occupiers to occupy and use Lot 415, and if so, whether D1 had acted in breach of his duties as the Agent/Trustee/Helper and caused loss and damage;

(3) Whether, in his capacity as Agent/Trustee/Helper, D1 should have but failed to distribute Ding Payments to P1 and/or P2;

(4) Whether D1 and/or D2 had failed to render proper accounts and/or provide proper information in relation to LWST, and if so, whether D1 and/or D2 had acted in breach of their duties as managers of LWST;

(5) Whether D1 and/or D2 have let out the 1^st, the 2^nd and/or the 3^rd Properties at an undervalue under various leases, and if so, whether D1 and/or D2 had acted in breach of their duties as managers of LWST and caused loss and damage;

(6) Whether D1 and/or D2 failed to pay rates in respect of various landed properties of LWST in a timely manner, if and so, whether D1 and/or D2 had acted in breach of their duties as managers of LWST, and/or wrongfully reimbursed themselves and caused loss and damage;

(7) Whether there was valid authorization that D1 and/or D2’s legal fees, for this action or otherwise, be paid out or reimbursed from LWST’s funds, and whether D1 and/or D2 have made unauthorized payments out or received reimbursements;

(8) What are the appropriate remedies, if any; and

(9) Whether Ps’ right to bring an action for (a) accounts including but not limited to an account as to Ding Payments before 2011; (b) any sum, if any, due on taking the said accounts; and (c) compensation or damages was and is time-barred.

35.  The parties must be bound by their respective pleadings and the Joint Statement of Issues.

D. THE RELEVANT LEGAL PRINCIPLES

36.  It is well established that the issues in a trial are defined by pleadings, not by evidence. One cannot slip in an unpleaded issue by saying that there is evidence on the issue. As said by Ma CJ in Kwok Chin Wing v 21 Holdings Ltd^[10]:-

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited [2005] 2 HKLRD 795, 799 [6(1)]. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Limited v Crystal Jet International Limited:-

‘(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be “slipped in” when evidence is being given in the hope that the other side is not sufficiently alert to object.’

22. …… one does not sift through the evidence adduced in a trial in the hope that something was said that can conceivably found a cause of action. Issues, I would reiterate, must be properly pleaded unless for some reason the pleadings have assumed a less significant role in the proceedings.” (Emphasis added)

37.  The purpose of pleadings is to define the real issues in dispute and to ensure that the litigation is conducted in a fair way. It is pertinent to note what has been said by Yuen JA in Chan Kong v Chan Li Chai Medical Factory (Hong Kong) Ltd^[11]:

“15. …… It is well established that pleadings need to be clear - because pleadings are the foundations on which the rest of the action stand. The reason why parties to litigation must ensure that the real issues in dispute are defined in advance in the pleadings is so that there is an unambiguous framework for the many interlocutory steps that follow in an action, such as discovery of documents, interrogatories and witness statements, as well as for the conduct of the trial itself. A statement of claim should make it clear to the reader what the plaintiff's cause of action is, and it should set out the material facts which provide the basis for him to pursue that cause of action. It is not adequate for a plaintiff just to set out his story extensively and then to allege a number of breaches of rights for which he claims relief. Put another way, it should not be left to the reader to guess how the dots should be connected.

16. The more complex the facts and the more complicated the claim, the more important it is for the pleader to get it right. That is because the more obtuse the pleading, the more capacity there is for genuine misunderstanding or specious opportunism. And the more blind alleys are left in a pleading, the more expensive and time-consuming the litigation will be.” (Emphasis added)

38.  All the causes of action relied upon by a claimant must be pleaded in the statement of claim. A new cause of action cannot be raised in the reply. A claimant may only raise a new claim by amending his statement of claim. As said by Lam J (as he then was) in Magic Score Limited v. The Hong Kong and Shanghai Banking Corporation Limited and Another^[12]:-

“20. Thus, it is not appropriate to raise in the reply a new cause of action (see Hong Kong Civil Procedure 2006 Paragraph 18/3/2). A plaintiff who wishes to pursue an additional or alternative cause of action should do so by amending the statement of claim.

21. This is not simply a technical rule. A defendant to an action is entitled to know from the writ and statement of claim what are the precise limits of claims he is faced with. He should focus on the same and then put forward his case in his defence and prepare for the evidence accordingly. He should be able to conduct the litigation and arrange his affairs on the basis that all the relief and remedies claimed against him have been set out in the statement of claim, subject to any amendments that might be made to that document. He could, for example, consider whether to make any payment into court or any offer for settlement based on this. He could also decide what is the proportionate time and costs that he should spend on the litigation by reference to those claims. A reply (or any subsequent pleadings) is not the right place for new claims to be put forward as it does not contain any prayers and a defendant does not have any automatic right to file any pleadings subsequent to reply (see Order 18 rule 4). It would also be confusing for new claims to be buried amongst other positive allegations made in genuine reply to a defence.” (Emphasis added)

39.  In respect of evaluating the evidence given by witnesses, a valuable guidance can be found in Hui Cheung Fai and another v Daiwa Development Limited^[13], in which DHCJ Eugene Fung SC said:

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ……

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: e.g. Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).

79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).”

40.  Where there is a long passage of time between the events and the trial, contemporaneous documentation is of particular importance. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [14], Stock JA (as he then was) said:

“…… Comparison with contemporaneous documentation is always an aid to reliability of oral testimony, unless there is reason to believe that the documentation is contrived or materially incomplete; but where the passage of time between events and trial is as long as it was in the present case, and where there is such a host of contemporaneous documentation, as there was in this case, the documentation must, I would have thought, assume a special importance. ……

I would venture to suggest that the truth, in so far as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one would expect it to have been created, as well as to inherent probabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known. This is particularly so in a case such as the present, where events have taken place so long before trial and where there exists a mountain of contemporaneous documentation that can be used to point the way. This is not to say that the documentation should have been treated as if it stood on its own, not to be explained, contradicted or supported by oral testimony. It is however to say that in this case the approach adopted to assessment of the facts placed far too much emphasis on character impression and too little upon what was suggested by the documentation and by the inherent probabilities in their historical context. That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts ……” (Emphasis added)

41.  The parties in these proceedings are members of Liu’s Clan. They have the common ancestors and they are all relatives to each other. In respect of disputes between individuals in a personal relationship, the following have to be borne in mind:

(1) In Chen Tek Yee & Ors v. Chan Moon Shing[15], Yuen JA said:-

“29. …… when the parties are in a personal relationship (as contrasted with parties in a commercial transaction), it would be unrealistic to expect written records of assurances ……”

(2) Similarly, in Cheung Lai Mui v. Cheung Wai Shing & Ors[16]^, Wilson Chan J said:

“95. …… Members of the family dealt with each other on the basis of trust, not mistrust. They could not have envisaged litigation in the future, and they would not have generated records to protect themselves out of the blue.”

E. THE EVIDENCE

42.  I have considered the documents in the trial bundles. The authenticity of these documents is not in dispute. I attach weight to the matters recorded in the contemporaneous documents, unless the record is shown to be inaccurate by some undisputed or indisputable facts.

43.  Among those documents, there are some transcripts of the meetings of LWST from 2014 to 2017. P4 attended those meetings and recorded the exchanges in the meetings. Transcripts of the meetings (“the Transcripts”) have been produced as evidence in the trial. Counsel have agreed that the Transcripts are accurate. I note that something said in the meetings are inaudible and cannot be shown on the Transcripts. Further, the transcript of each meeting may not capture the entire meeting. Notwithstanding these deficiencies, the Transcripts have nevertheless shown many exchanges in those meetings. I have duly considered those transcripts.

44.  The parties have also adduced experts’ evidence on the market rentals of the Properties at different points of time. I have also considered the experts’ evidence. For reasons which will become apparent later in this judgment, it would not be necessary for me to decide the opinion of which expert is to be preferred.

45.  I have considered the evidence given by the factual witnesses. I would set out the salient features of the evidence of each factual witnesses and discuss the same in the paragraphs below. Before reaching a conclusion of the credibility and reliability of the evidence of each factual witness, I have considered his evidence as a whole and the totality of the evidence in the round.

46.  Having seen and heard the factual witnesses, I am of the following view:

(1) P1 and Tse are not reliable witnesses. Save and except the matters which are not in dispute, I refuse to attach weight to their evidence.

(2) P2’s evidence is of limited assistance in this case.

(3) P4’s evidence, regarding the part in respect of which he has personal knowledge, I accept that his evidence is truthful and reliable.

(4) Save and except on the issue of Ding Payments and on the issue of P4’s requests for documents, D1’s evidence is reliable.

(5) Save and except on the issue of P4’s requests for documents, TK’s evidence, CF’s evidence and D2’s evidence are reliable.

E1. P1

47.  P1 was born in 1937. At the time of the trial, he was about 85 years old. He has never attended the meetings of LWST, and has never participated in the management of LWST. He has also never attended the meetings nor participated in the management of LSCT. He did not have any personal knowledge concerning the practice or custom of the LWST or LSCT. In respect of the matters in this case, most of which were told to him by his son, ie P4. P1 himself did not have any personal knowledge of those matters.

48.  Regarding Lot 415, P1 said the following in his evidence:

(1) He knew that there were many registered owners of Lot 415, and many of them were not residing in Hong Kong. He also knew that D1 was one of the registered owners of Lot 415.

(2) Lot 415 was a piece of agricultural land, in Lo Wu, near Mainland China.

(3) D1 was responsible for the management of Lot 415.

(4) In about 2011, P4 told him that Lot 415 was occupied by some unauthorized persons. He asked P4 to find a lawyer to handle the matter.

(5) He did not receive the reinstatement notice dated 12 March 2012 (“the 2012 Reinstatement Notice”) issued by the Planning Department.[17] He was made aware of the existence of the 2012 Reinstatement Notice by P4.

(6) Under cross-examination, P1 was referred to a letter of WH dated 10 December 2013. The letter was sent out by WH on behalf of P1 and P3 to all the other co-owners of Lot 415. In the letter, WH said:

“We act for [P1 and P3], two of your co-owners of [Lot 415].

2. We are instructed that [Lot 415] has been occupied by occupiers who have carried out unauthorized development by laying concrete and putting up metal fence and gate thereon. Our clients have therefore been excluded entirely from [Lot 415] and prevented from enjoying [Lot 415]. Despite our clients’ repeated requests and demands, the occupiers still fail and refuse to cease their occupation thereof nor have they ceased ousting our clients from [Lot 415]. Please note that we have already issued a pre-action letter dated 5^th November 2013 to the occupiers of [Lot 415] on our clients’ behalves. ……

3. We write to inquire whether you have granted any tenancy to any of the occupiers; and if so, we hereby request you to provide the following particulars and document(s) ……

4. It has come to our clients’ recent notice that a Reinstatement Notice … has been issued by the Planning Department by reason of the unauthorized development of [Lot 415]. If you have granted any tenancy to the occupiers, it is our clients’ position that you either gave leave to your tenant(s) to commit such breach or abstained from taking any reasonable steps to prevent such breach by your tenant(s). You will be held liable for any claims successfully brought against[18] our clients.

5. Alternatively, if you confirm that no tenancy has ever been granted to any of the occupiers by you, please let us know whether you are prepared to join as co-plaintiff in the intended legal action; otherwise, we shall assume that you do not intend to join as co-plaintiff; and if that being the case, our clients may join you as a defendant for the purpose of our clients’ intended legal action.

……”

(7) Mr Yip pointed out to P1 that in that letter, it had not been said that D1 had the role of managing Lot 415. P1 said that he disagreed. I then asked P1 whether he understood the question asked by counsel. P1 said that he did not understand. I then explained the question to P1 in simple language. Notwithstanding my repeated explanations, P1 kept on saying that he did not understand. P1 said that the matter was handled by his son. At the end, Mr Yip put to P1 that D1 did not have the obligation of managing Lot 415. P1 disagreed.

(8) P1 mentioned that on 5 November 2013, a pre-action notice was served on the occupiers of Lot 415. On that date, he went there together with P4 and Tse by a car. However, P1 stayed in the car or in the vicinity of the car at all times. He did not actually go inside Lot 415 to see what was on the land. The matter in fact was handled by P4. This was the second time P1 went to Lot 415. P1 went to Lot 415 for the first time when he was 6 or 7 years old, when he was taken there by his mother.

(9) On 13 December 2013, P1 went to Lot 415 again together with P4 and Tse to serve pre-action notice on the occupiers. Like the previous occasion, P1 did not go inside Lot 415.

(10) P1 accepted that prior to 24 February 2014 (when P1 and P3 commenced HCA 313/2014), he did not know whether Lot 415 was still being unlawfully occupied.

(11) In respect of the 2012 Reinstatement Notice, despite it was issued to all the registered owners of the land, P1 disagreed that it was the obligation of all the registered owners to carry out the reinstatement works as stated in the notice. P1 insisted that it was the obligation of D1 only, and the costs should be borne by D1 personally.

49.  P1 also mentioned the following in his evidence:

(1) He instructed P4 to audio record the meetings of LWST.

(2) He was acquainted with Liu Tim Man (廖添文). He knew that Liu Tim Man was a member of LWST. He knew that Liu Tim Man had emigrated overseas but had come back to Hong Kong with his family. He knew that Liu Tim Man was in his 70s and had retired. Liu Tim Man did not mention to P1 that he (ie Liu Tim Man) intended to work or to start a business.

50.  P1 has no participation in the meetings and in the management of LWST and in LSCT. In respect of most of the issues in these proceedings, P1 does not have any personal knowledge. Many matters in P1’s evidence in fact are hearsay evidence. P1 heard these matters from P4 or Tse. His evidence, even if accepted, would be of very limited assistance only.

51.  I do not regard P1 as a reliable witness.

(1) WH’s letter dated 10 December 2013 is an important document in this case. Naturally, if D1 is the Agent/Trustee/Helper having the obligation to manage Lot 415 as contended by Ps, this point would have been made in the said letter. The omission of that point in the letter calls for an explanation. Mr Yip has fairly put the question to P1. However, P1 has not given any meaningful answer to the question. P1 claimed that he did not understand the question. I have repeatedly explained the question to him in simple language. However, P1 still said that he was unable to understand the question. Having seen and heard P1, in my judgment, there is no truth in P1’s answer saying that he did not understand the question. The truth is that he was unwilling to answer the question, and was trying to avoid to provide an answer.

(2) The question concerning WH’s letter dated 10 December 2013 is an important question. P1 has used an untrue excuse to refuse to provide an answer to the question. This has a significant adverse impact on the reliability of P1’s evidence.

(3) Without any basis or reason, P1 insisted that carrying out the works as stated in the 2012 Reinstatement Notice should be an obligation solely borne by D1, and the costs incurred should be solely borne by D1 personally. Evening according to Ps’ case, there is no allegation that D1 should personally bear all the costs in relation to the matters concerning Lot 415. This episode shows that P1 is willing to say anything which is beneficial to himself and detrimental to D1, regardless whether the matter is true or not.

(4) Having considered P1’s evidence as a whole, I am of the view that his evidence is not reliable. I attach no weight to his evidence.

E2. Tse

52.  Tse was a legal clerk of WH. However, at the time of the trial, he has left WH and is working in another law firm.

53.  Tse was responsible for serving documents on the occupiers of Lot 415 in late 2013 and early 2014. There is a dispute between P1, P2 and P3 on the one hand and D1 on the other hand as to whether Lot 415 has been ceased to be occupied by trespassers before P1 and P3 commencing HCA 313/2014, and hence that action is unnecessary.

54.  Tse said the following in his evidence:

(1) On 5 November 2013, he, together with P1 and P4, went to Lot 415 to serve a pre-action notice on the occupiers of the land. He took some photos on that occasion. The land was fenced off by some metal hoardings. Looking at the wasted materials on the land, P2 had an impression that someone was operating a recycling business at the scene. P2 posted a copy of the pre-action notice on the main entrance and handed another copy to a member of the staff working there. P2 stayed at the scene for around 10 to 15 minutes.

(2) On 13 December 2013, P2, together with P1 and P4, went to Lot 415 again to serve another pre-action notice. The situation on the land remained the same. P2 also posted copies of the notice on the main entrance and handed a copy to a man working on the land. P2 also took some photos of the land.

(3) On 7 April 2014, P2 himself went to Lot 415 to serve the writ of summons in HCA 313/2014 (“the 313 Writ”) on the trespassers. Only P2 went to Lot 415 on that day. On that occasion, Tse encountered a woman on the land, who claimed to be a tourist and a friend of the boss of the site. The woman told Tse that he could contact the boss by phone, and the woman gave Tse a mobile phone number. Tse gave a sealed copy of the 313 Writ to the woman, and told the woman that he would visit the land again on 14 April 2014. Tse also took some photos of the land. From these photos, it can be seen that the land was surrounded by metal hoardings. However, no activity inside the land is shown in the photos.

(4) On 14 April 2014, Tse went to Lot 415 again (also alone) to try to serve the 313 Writ. Tse also took some photos.

(5) Regarding the visit on 14 April 2014, in his witness statement, Tse said:

(a) The land was still entirely fenced off by metal hoardings. There were people working inside the metal hoardings.

(b) Tse spoke to a workman, who claimed that he was not the boss, and he did not know the boss.

(c) Tse was unable to contact the boss by phone. He posted up a sealed copy of the 313 Writ at the main entrance.

(6) However, in his oral evidence given in the trial, Tse said something very different. Under cross-examination, Tse was asked why the photos taken by him could not show any worker doing work on the land. Tse said that on that date, when he arrived the scene, there were two plainclothes policemen. The two plainclothes policemen told Tse that they were prepared to enter the land to arrest some unlawful workers. They asked Tse to enter the land first and asked people inside to come out. Tse then knocked on the door. Someone opened the door and Tse went inside. Tse handed over a sealed copy of the 313 Writ to one of the persons there, and then Tse immediately went outside. At this point of time, police went inside.

(7) What has been said by Tse in his oral evidence as stated in the previous paragraph has not been mentioned by Tse in his witness statement at all. In fact, in his affirmation dated 26 May 2014 filed in HCA 313/2014, Tse said:

“5. I attended at [Lot 415] again at 10:30 a.m. on 14th April 2014 …… in an attempt to personally serve the [313 Writ] on [the trespassers] but such attempt was futile. On that occasion, I knocked on the Right Entrance Door and [a man] answered the door. He reiterated that he was employed to work at the Land. He said he did not know who his boss was. …… I gave a copy of [the 313 Writ] and affixed a sealed copy of the [313 Writ] in a conspicuous place on the Land near the Left Entrance Door …… I made attempts to contact [the boss] by dialing [a phone number]. Thereafter, I posted up a further sealed copy of the [313] Writ] in a conspicuous place of the Land near the Left Entrance Door ……”

(8) Mr Yip referred Tse to this affirmation. Tse agreed that he did not mention that he saw any people working on Lot 415 in this affirmation. Tse finally conceded that he did not see anyone working on Lot 415 on that date.

55.  In my view, when being asked why the photos taken by him on 14 April 2014 could not show any workers doing work on Lot 415, Tse has said something untrue to try to explain the matter. Tse alleged that on 14 April 2014, when he arrived at Lot 415, there were plainclothes policemen on the scene conducting an operation of arresting unlawful workers. I refuse to accept this evidence. If there is any truth in this story, bearing in mind that Tse is a legal clerk, there is no reason why Tse did not mention this in his affirmation filed in HCA 313/2014 and in his witness statement filed in this case. In my judgment, the episode involving an operation by plainclothes policemen is a recent invention made up by Tse in the witness box.

56.  Tse cannot be regarded as a reliable witness. I refuse to attach weight to his evidence.

E3. P2

57.  P2 is the son of Liu Hon Kee. His family emigrated to England in 1966. His father passed away in 2007. Upon the father’s death, P2 became the head of his own Fong. P2’s son is P5, who was born on 22 October 1992.

58.  P2 has never attended any meeting of LWST or LSCT. He has also never participated in the management of LWST or LSCT. However, he said that he had heard matters concerning the Liu’s Clan from his father and his maternal grandmother, and from some people inside the clan.

59.  The focus of P2’s evidence is the Ding Payments. In his witness statement, P2 said:

“4. In early 2014, I received from D1 a statement of account for the year 2013. I noticed a Ding payment in the sum of $7,000 was written on the statement of account. …… I called [P4] and learned from him for the first time the $7,000 was a Ding payment from Liu Sam Chuk Tso which my son and I were entitled to. I also learned from [P4] and became aware of the specifics of the payments of Liu Sam Chuk Tso i.e. a part for each Ding and a part for each Family ……

5. Up to now, I have only received Liu Sam Chuk Tso Ding payments (for both myself and on behalf of my son Liu Ho Kwong) for 2013 to 2016 (inclusive). Save as aforesaid, during the years since 1992 when D1 acted as Agent/Trustee/Helper, he had not distributed to me and my son, who were and still are members of Liu Sam Chuk Tso, any Ding payments. …… D1 must have failed to collect the Ding payment for me and my son or having collected them, withheld payment to us.” (Emphasis added)

60.  D1 has produced the following correspondence between P2’s mother and D1:

(1) Letter from P2’s mother to D1 dated 6 March 2009, in which the mother acknowledged receipt of, inter alia, cheque(s) and an annual account.

(2) Letter from D1 to P2’s mother dated 12 March 2009, in which D1 said that he met P2’s father in Hong Kong in March 2007, and he had explained the 2006 accounts and other financial matters to the father. D1 also enclosed the 2007 accounts in the letter for the mother’s perusal. D1 said that he was unwilling to be the helper managing the co-owned properties. D1 suggested that members from the 5 Fongs should take turn to be the helper on a roster basis.

(3) Letter from P2’s mother to D1 dated 7 April 2009, in which the mother agreed with D1 that the 5 families should take turn to be the helper. Alternatively, perhaps the 5 families might engage a company to do the works.

(4) Letter from P2’s mother to D1 dated 8 April 2009, the substance of which is same as that of the letter dated 7 April 2009.

(5) Letter from P2’s mother to D1 dated 12 January 2012, in which the mother acknowledged receipt of, inter alia, cheque(s) and the accounts.

61.  Under cross-examination, P2 was referred to the aforesaid correspondence. P2 said that D1 would send a cheque and a letter to his family every year. The cheque was in P2’s name, and P2 would deposit the cheque into his own account. P2 accepted that his family received a cheque annually. His contention was that the amount on the cheque might not be the correct amount of his family portion of all the entitlements from the Liu’s Clan, including the Ding Payments.

62.  P2’s evidence lacks accuracy in one important aspect. It is Ps’ pleaded case that Ding Payments would be paid to the heads of the 5 Fongs.[19] The pleaded case has been verified by, inter alia, a statement of truth signed by P2. While P2’s father was alive, the head of Fong in P2’s family would be P2’s father, not P2. P2’s father passed away in 2007. In other words, at least until 2006, the Ding Payments would be paid to P2’s father, not P2. In [5] of his witness statement, P2 complained that D1 had failed to distribute to him and his son any Ding Payment since 1992. Obviously, according to Ps’ pleaded case, until 2006, the Ding Payments would be paid to P2’s father, not P2. The complaint made by P2 in his witness statement is incompatible with the pleaded case verified by a statement of truth signed by P2.

63.  For the reasons set out in [84] to [88] below, I would accept that based upon the documentary evidence before the court, it seems that there has been no Ding Payment from D1 to P2 from 2008 to 2010, in 2012 and in 2017.

64.  After the death of Liu Hon Kee, whether there was Ding Payment from D1 to P2 in a particular year in fact can be seen from the documentary evidence. P2’s evidence is of limited assistance on the topic of Ding Payments.

E4. P4

65.  P4 was born in England. He attended a primary school for two years in Hong Kong. Save that, before 2004, he was living in England at all times. He returned to Hong Kong in 2004. He agreed that he had limited understanding of the matters of LWST. However, he said that he had learned from his brothers, and thus had been getting familiar with the matters of LWST.

66.  He confirmed [62] of P1’s witness statement, which is as follows:

“62. In early 2014, [P4] informed me, and I verily believe that Alan David Liu who is also a member of [LWST] told [P4] that he attended the members’ meeting of [LWST] and questioned D1 and D2 as to why the rent for the 1^st Property was so low ($3,000 per year) but D1 rebuked Alan in the meeting that he came back from UK and knew nothing. Alan also told [P4] that [Liu Tim Man] also confronted D1 on why the 2^nd Property was let out at the monthly rent of $20,000 which was far below the market rent. D1 replied the existing lease would expire on 31 December 2013 and he would thereafter put the 2^nd Property up in the market of leasing at $50,000 per month. [Liu Tim Man] then offered to rent the 2^nd Property at $60,000 per month but D1 turned down his offer and insisted that the 2^nd Property be put on market for leasing at $50,000 without providing any reasonable explanation therefor.”

67.  The matters in [62] of P1’s witness statement are matters allegedly occurred in LWST meeting held in 2013. P4 himself did not attend the LWST meeting in 2013. Those matters are hearsay evidence. There is no evidence directly from Alan David Liu or Liu Tim Man confirming the truthfulness of those matters. Further, those matters are disputed by Ds. Having considered all the evidence, I am of the view that Ds’ version concerning the offer from Liu Tim Man should be accepted, and no weight should be given to the version alleged in [62] of P1’s witness statement.

68.  P4 said that he knew that Liu Tim Man was a member of LWST. Liu Tim Man had retired and had no business. P4 also said that he had been asked by P1 to attend the meetings of LWST and to take audio recordings of those meetings.

69.  P4 attended the meetings of LWST from 2014 to 2016. In respect of these meetings, P4’s evidence is as follows:

(1) P4 posted a notice dated 23 December 2014 (“the 2014 Notice”) on the notice boards at various locations of Po Sheung Tsuen where D1 and D2 lived for the LWST Meeting on 31 December 2014. The notice requested Ds to produce all tenancy agreements, related bank accounts, and all evidence relating to the income and expenditure of LWST, for the years 2012, 2013, and 2014.

(2) In LWST meeting held on 31 December 2014 (“the 2014 Meeting”), only tenancy agreements for Po Sheung Tsuen were provided to P4. Tenancy agreements for Shek Wo Hui, bank statements, and documents relating to income and expenditure of LWST was not made available.

(3) P4 posted a notice dated 28 March 2015 (“the March 2015 Notice”) at the same locations for the LWST meeting on the Ching Ming Festival, ie 5 April 2015 (“the 2015 Ching Ming Meeting”). In that notice, it was stated that Ds did not make available all documents requested for in the 2014 Meeting, and all the documents should be provided in the 2015 Ching Ming Meeting.

(4) In the 2015 Ching Ming Meeting, P4 requested for inspection of documents, but his requests were ignored by D1.

(5) P4 attended the meeting held in December 2015 (“the 2015 December Meeting”). He requested to see the tenancy agreements in Shek Wo Hui. D1 refused by saying that P4 had looked at them last year. P4 told D1 that he had not produced all the tenancy agreements last year. D1 refused to let P4 look at them, and P4 was told to shut up. There were unhappy encounters between D1 and CF on the one hand and P4 on the other hand in that meeting.

(6) P4 posted a notice on 22 December 2016 (“the 2016 Notice”) at the same locations, and requested Ds to provide copies of all tenancy agreements, bank statements, documents relating to the income and expenditure of LWST and records relating to the sale and purchase of stocks for the years 2012, 2013, 2014, 2015 and 2016 for inspection during the LWST meeting to be held on 31 December 2016 (“the 2016 Meeting”).

(7) P4 attended the 2016 Meeting. He demanded to look at the tenancy agreements. D1 said that P4 had already looked at the tenancy agreements last year and refused to let him look at them again. One of treasurers, CF, rebuked P4. P4 requested to arrange a time to look at the tenancy agreements. D1 refused P4’s request.

70.  Regarding the aforesaid meetings, P4’s evidence is supported by the Transcripts. I accept his evidence in this aspect.

71.  P4 attended the May 2017 Meeting. He was the only member present in the meeting voting against the 2017 Resolution. This is shown in the minutes of that meeting.[20]

72.  Regarding P4’s evidence, as to the part in respect of which he has personal knowledge, I accept that his evidence is truthful and reliable.

E5. D1

73.  D1 said that in respect of the 15 Units as pleaded in the Re-Amended Defence, there has not been any formal election or appointment of the helper who would look after these properties on behalf of the 5 Fongs. It depended on who would be willing to spend time and effort to do the jobs, and who would be respected and trusted by the 5 Fongs. Save and except Liu Hon Yin’s Fong, all the other Fongs had emigrated. For this reason, it has been agreed, and it has been the practice for decades, that one member of Liu Hon Yin’s Fong would be the helper.

74.  D1 said that the helper’s jobs do not include looking after Lot 415. Much time has been spent on this topic in cross-examination.

(1) In 2006, Liu Hon Wong (ie P1 herein) commenced a set out legal proceedings (ie HCMP 2142/2006) against Liu Chee Kwan (ie D1 herein) and another. An issue in that case is whether the helper would be entitled to have 10% of the net rental incomes from the relevant properties as remuneration. Liu Hon Wong argued that the answer should be “No”, while Liu Chee Kwan contended that the helper would be entitled to have the 10% as remuneration. That case eventually was settled on 4 July 2012 (“the 2012 Settlement”). Due to the confidentiality clause in the 2012 Settlement Agreement, the parties in this case have not informed me the details of the settlement.

(2) In HCMP 2142/2006, Liu Chee Kwan has made a witness statement dated 15 July 2009 (“the 2142 Statement”). Counsel have agreed that notwithstanding the settlement in HCMP 2142/2006, Mr Chau may ask D1 questions by referring him to the matters in the 2142 Statement during cross-examination.

(3) In the 2142 Statement, Liu Chee Kwan said:

“5. At the death of [Liu Hon Fan], the land remained unsold and registered in the Father’s name (“the Father’s Lands”) were succeeded by the five sons. ……

……

32. For convenience, and as known, agreed and consented to by all members of the 5 Fongs … all along, that the practice for the past 50 years has been that one person (“the helper of the 5 Fongs”) amongst the members of the 5 Fongs would collect the rent/income and take care of the management of Father’s Lands and since about 1992 be given 10%, after defraying expenses, of the income for his trouble and efforts, and then distribute the net income to the 5 sons/5 Fongs. ……”

(4) Mr Chau referred D1 to the aforesaid parts of the 2142 Statement. Mr Chau pointed out to D1 that Lot 415 was a piece of land in the estate of Liu Hon Fan, and Lot 415 was succeeded by the 5 sons. Hence, the terms “the Father’s Lands” used by D1 in the 2142 Statement would include Lot 415, and the practice mentioned by D1 in [32] of the 2142 Statement would include Lot 415. D1 agreed. However, D1 mentioned a family meeting in 1992 (“the 1992 Family Meeting”).

(5) D1 said that in 1992, after the death of Liu Hon Yin, there was a family meeting attended by 4 Fongs. Liu Hon Wong’s Fong did not participate in this meeting. The 1992 Family Meeting was chaired by Liu Hon Kee. In the meeting, it was discussed who should be the helper after the death of Liu Hon Yin. Liu Hon Kee suggested that D1 should be the next helper. However, D1 said that he could not look after and manage the agricultural lands. His leg had been amputated and he had disabilities. He could not go to inspect those agricultural lands in remote areas. D1 counter-proposed that each Fong should send out a member to do the helper’s jobs on a roster basis. After discussion, it was agreed that D1 would be the helper, but D1 would only need to manage the buildings, not the agricultural lands. It was also agreed that any member in the 5 Fongs might let out Lot 415.

(6) Mr Chau submits that the 1992 Family Meeting is a fabrication made up by D1. Mr Chau points out that D1 did not mention the 1992 Family Meeting in his pleadings and in his witness statements. He only mentioned this for the first time under cross-examination. Mr Chau’s points, in my view, are fair criticisms.

(7) Having carefully considered the matter, notwithstanding Mr Chau’s criticisms, I come to the conclusion that D1’s evidence on the 1992 Family Meeting is true.

(a) Ps’ pleaded case is that after the death of Liu Hon Yin, “it was the custom and practice” the 5 Fongs that D1 became the Agent/Trustee/Helper in 1992.[21] However, Ps have failed to spell out what was the custom, and what was the practice, and why by the alleged custom and practice, D1 became the Agent/Trustee/Helper in 1992. Further, Ps have not adduced any evidence to prove the alleged custom and practice.

(b) Naturally, D1 would not become the helper in 1992 out of the blue. It is more probable than not that D1 became the helper because of some discussion among the Fongs in 1992. The existence of the 1992 Family Meeting is inherently probable.

(c) As set out in [51] above, the absence of any matter concerning the alleged obligation of D1 in relation to Lot 415 in WH’s letter dated 10 December 2013 calls for an explanation. The non-mentioning of D1’s obligation in relation to Lot 415 in the said letter in fact lends support to the existence of the 1992 Family Meeting. Although P1 did not attend the 1992 Family Meeting, P1 must know the conclusion of the meeting. Hence, there is no allegation in WH’s letter dated 10 December 2013 saying that D1 has failed to perform his duty of managing Lot 415.

(8) I also accept that in the 1992 Family Meeting, it was agreed that any member of the 5 Fongs might let out Lot 415. That is why in WH’s letter dated 10 December 2013, WH asked the other registered owners of the Lot 415 whether they had granted any tenancy to anyone.

75.  D1 has produced the accounts prepared by him concerning the 5 Fongs from 2004 to 2017 (“the Accounts”).[22] There is no dispute that in the Accounts, Lot 415 is called “恐龍坑”.

(1) The 2008 Accounts show the following:

(a) There was a rental income of HK$30,000 from Lot 415.

(b) The total of the rental incomes from all the other properties (ie apart from Lot 415) was HK$338,800.

(c) The remuneration paid to the helper was HK$33,880.

(2) The 2009 Accounts show the following:

(a) There was a rental income of HK$70,000 from Lot 415.

(b) The total of the rental incomes from all the other properties (ie apart from Lot 415) was HK$312,700.

(c) The remuneration paid to the helper was HK$31,270.

76.  D1 said that in 2008 and 2009, his younger brother Liu Chi Chun (廖滋銓) had let out Lot 415 to a tenant to operate a bicycle field on the land. Hence, there were rental incomes from Lot 415 in these two years. However, since Lot 415 was not within the helper’s scope of works, he did not take those incomes into account in calculating the remuneration to the helper. D1’s evidence is consistent with the 2008 Accounts and the 2009 Accounts.

77.  D1 said that in the 2016 Accounts and in the 2017 Accounts, due to some clerical errors, “8巷29號” in fact should be “8巷49號”. I have no reason to doubt this explanation. I accept this.

78.  Regarding the Unlawful Occupation Event, D1’s evidence is as follows:

(1) D1 did not know that the Planning Department issued a notice to the registered owners of Lot 415 on 26 January 2010
(“the 2010 PD Notice”), requiring them to stop the unlawful usage of Lot 415, ie using the land as a storage and a factory.

(2) He came to know that Lot 415 was occupied by trespassers because Liu Chi Kai (廖滋啓) told him, but D1 did not remember when this was.

(3) Liu Chi Kai, Liu Chi Chun, and Liu Chi Tai (廖滋泰) followed up the matter by taking care of the necessary works. D1 told them that the expenses incurred could be reimbursed by the fund in the common pool (開阿公數).

(4) In this matter, D1’s role was to give opinions and to look at the big picture, for example, comparing prices and making sure they (ie Liu Chi Kai, Liu Chi Chun, and Liu Chi Tai) would not be tricked.

(5) Liu Chi Kai, Liu Chi Chun, and Liu Chi Tai had fenced off Lot 415. D1 could not remember when Lot 415 was fenced off, and would need to check the receipts to find out.

(6) At the time when Ps commenced HCA 313/2014, Lot 415 had already been fenced off by Liu Chi Kai, Liu Chi Chun and Liu Chi Tai. No one was physically occupying Lot 415 at that time.

79.  On 29 August 2012, in STS 2615 and 2617/2012, Liu Chi Tai and Liu Tse Kai were fined by a Magistrate in the sum of HK$100,000. D1 acknowledged in cross-examination that this was due to someone occupying Lot 415.

80.  On 30 July 2014, in STS12397-12404/2013, a Magistrate fined D1, Liu Chi Chun, Liu Chi Tai and Liu Chi Kai, to a total sum of HK$360,000. D1 said that he was not sure why there would be a second prosecution. Liu Chi Kai had hold him that there was a second prosecution because only part of the works had been done, and the works required by the Government had not been completed.

81.  Mr Chau submits that D1 had not called Liu Chi Chun, Liu Chi Tai or Liu Chi Kai to give evidence on this matter. This is true. However, in cross-examination, Mr Chau has not offered D1 an opportunity to explain why he did not call these witnesses. In these circumstances, it would not be fair and proper to draw any adverse inference against D1 because of the absence of these witnesses in the trial.

82.  In respect of the reinstatement works concerning Lot 415, having examined D1’s evidence in the light of the contemporaneous documents, I accept D1’s evidence. D1 has produced documents concerning the reinstatement costs of Lot 415.[23] These documents show that there were a lot of reinstatement works done on Lot 415 from December 2013 to April 2014. In view of these contemporaneous evidence, I accept that the D1, Liu Chi Chun, Liu Chi Tai and Liu Chi Kai have recovered possession of Lot 415 by December 2013, and they were doing some reinstatement works from late 2013 to early 2014.

83.  The fact that D1 has taken steps to recover possession of Lot 415 and to reinstate the land does not mean that D1 has the obligation to manage Lot 415 as alleged by Ps. In fact, any co-owner of Lot 415 would have the right and the obligation to take action while the land is occupied by some trespassers. According to Ps’ own case, P1 and P3 have actually taken action to try to recover possession of the land. See WH’s letter dated 10 December 2013, and HCA 313/2014.

84.  Turning to the Ding Payments, Mr Chau has helpfully summarized the relevant documentary evidence as follows:

(1) Accounts prepared by D1 and produced by P1

Year	Whether Ding Payment mentioned
1992	Yes
1995	No
1995	No
1996	No
1997	No
2003	No
2004	No
2005	No
2006	No
2007	No
2009	No
2010	No
2011	No
2012	Yes
2013[24]	No
2016	No
2017	No
2018	No

(2) Accounts prepared by D1 and produced by P2

Year	Whether Ding payment mentioned
2008	No
2009	No
2010	No
2012	No
2013	Yes
2014	Yes
2015	Yes
2016	Yes
2017	No

85.  Regarding the Ding Payments to P1’s Fong, D1’s evidence is as follows:

(1) In D1’s 2^nd supplemental witness statement, D1 said:

“…… the Fong payments from [LSCT] have been recorded in the Five Brother Accounts and distribution have been made accordingly. [The Ding Payments] are and were at all material times distributed to the members directly through the family heads. However, before 2012, the manager(s) of [LSCT] would hand over the Ding payments of Liu Hon Wong’s family and Liu Hon Kee’s family to me for convenience for me to pass to them.”

(2) In his oral evidence, D1 agreed that before 2012, save and except the period from 1998 to 2002 (D1 was living in Canada in those years), the Ding Payments for P1’s Fong before and including 2012 were collected by him.

(3) During cross-examination, D1 was shown the 1992 and 2012 Accounts for P1’s Fong, in which he made separate entries, expressly labelled as Ding Payments. However, when shown the 2011 Accounts sent to P1, which did not show any Ding Payments, D1 said that he could not remember why there was no entry in the accounts mentioning Ding Payments.

(4) Under cross-examination, Mr Chau referred D1 to the 2010 Accounts for P1’s Fong, and asked D1 why there was no distribution of Ding Payments to P1 in that year. D1 said that, as P1 and D1 were in litigation with each other at that time, he had withheld the Ding Payments. He could not recall whether the Ding Payments in the other years had also been withheld. D1 said that by saying withholding the Ding Payments, he meant that he had collected the Ding Payments from LSCT, but had not distributed them to P1. D1 also said that the Ding Payments issue between him and P1 had been settled.

(5) In [9] of his 2^nd supplemental witness statement, D1 said that:

“[The Ding Payments] to [P1] for any time prior to and including 31^st December 2011 had been settled in HCMP 2142 of 2006. ……” (“the Alleged Settlement”)

However, this is disputed by P1. P1 contends that there is no settlement between him and D1 concerning the Ding Payments.

86.  As to whether D1 may rely upon the Alleged Settlement as to defence to P1’s claim for the Ding Payments, Mr Chau submits that this should not be an issue in this case, for D1 has not pleaded the Alleged Settlement as a defence to P1’s claim in these proceedings. Mr Yip does not dispute this. Mr Chau is certainly correct on this pleading point.

87.  Regarding the Ding Payments to P2’s Fong, D1’s evidence is as follows:

(1) During cross-examination, D1 was shown the 2013, 2014, 2015 and 2016 Accounts for P2’s Fong, in which he made separate entries, expressly labelled as Ding Payments. However, when D1 was shown the 2012 and 2017 Accounts for P2’s Fong, which did not contain any Ding Payments, D1 replied:

(a) For 2017, D1 did not help P2’s Fong collect the Ding Payments.

(b) For 2012, he should have distributed the Ding Payments to P2’s Fong but he was not sure. He could not explain why he had distributed HK$7,000 to P1’s Fong, but there appeared to be no distribution of HK$7,000 to P2’s Fong.

(c) In [16] of his 2^nd supplemental witness statement, D1 said that for the Ding Payments to P2’s Fong for 2011 and before were paid to Liu Hon Kee, and to his wife after the death of Liu Hon Kee. During cross-examination, D1 was shown the 2008, 2009, and 2010 Accounts for P2’s Fong, which did not show any Ding Payments. D1 was asked why he claimed that he had made the Ding Payments to P2’s Fong, but this was not shown in the Accounts. D1 said that he needed to look at his cheque-records. After a long pause, D1 said that if he did distribute the Ding Payments, he would have written it in the Accounts.

(d) When asked in cross-examination why in his 2^nd supplemental witness statement, he claimed that the Ding Payments for 2011 and before were paid to Liu Hon Kee and his wife, D1 said that he did not know how to answer and he was confused. However, D1 said that he should have distributed the Ding Payments.

88.  Having considered all the evidence, I am of the view that D1 did not have a clear memory on the matters concerning the Ding Payments. In the light of the documents summarized by the tables prepared by Mr Chau as shown in [84] above, it is more likely than not that in the years while Ding Payments are not shown in the relevant accounts[25], Ding Payments in fact have not been distributed by D1 to that Fong.

89.  As to the requests for documents made by P4, D1’s evidence is as follows:

(1) He had not read the 2014 Notice before the 2014 Meeting. In the meeting, D1 said that someone had told him that notices had been posted on Sheung Shui Wai notice boards, requesting Ds to do certain things. He could not remember what documents were given to P4 in the 2014 Meeting.

(2) Regarding the 2015 Ching Ming Meeting, D1 said that there was no formal meeting on 5 April 2015. Members of LWST gathered for a meal on that date, because it was the Ching Ming Festival. That was not a meeting of LWST. He had not read the March 2015 Notice. Whether there should be a meeting of LWST at the Ching Ming Festival was not a matter to be determined by P4. D1 said that he could not remember what happened on the Ching Ming Festival in 2015. D1 said that if P4 had requested to see documents on that occasion, D1 would have had refused.

(3) D1 could not remember whether there were heated exchanges with P4 in the 2015 December Meeting.

(4) He had not read the 2016 Notice. He could not remember the conversations between him and P4 in the 2016 Meeting.

90.  In [49] of D1’s witness statement, D1 said that both Ds had made clear to P4 that if members wanted to inspect further documents, they could contact the treasurers. Reading that paragraph in context, D1 was saying that this episode occurred in the 2014 Meeting. Mr Chau submits that D1’s evidence is contradicted by the transcript of the 2014 Meeting, for the alleged episode is not shown in the transcript. In my view, it would be difficult to say whether this episode occurred or did not occur by just looking at the transcript of the 2014 Meeting. As said in the above, the transcript of each meeting may not capture the entire meeting, and may not show every word said by everyone in the meeting.

91.  However, in respect of the details of the LWST meetings mentioned in Ps’ case and the exchanges in the meetings, it is obvious that D1 no longer has a clear memory. As to P4’s requests for documents, I prefer P4’s evidence to D1’s evidence.

92.  Regarding leasing out the Properties, D1’s evidence is that apart from the 1^st Property, LWST would consult some estate agents to find out the market rental when a lease was about to be signed. As to the 1^st Property, that property was a piece of agricultural land. In each of the leases of the 1^st Property, there was a clause requiring that all the structures on the land would need to be removed by the tenant at the end of the tenancy. The tenant was there for over 40 years, and the relationship with the tenant was harmonious. The tenant believed that the area would be redeveloped soon, and the Government might give them public housing once the redevelopment was implemented. The tenant said that he would demolish the structures on the land when he moved out. In my view, there is nothing inherently improbable in D1’s evidence on this point. I accept his evidence in this aspect.

93.  As to whether Liu Tim Man offered to rent the 2^nd Property (front portion) at the monthly rent of HK$60,000 in the LWST meeting held in 2013, D1’s evidence is that Liu Tim Man said that the monthly rental should be HK$60,000. However, when D1 put to Liu Tim Man that he could rent the property at the monthly rental of HK$60,000, Liu Tim Man declined to take up the offer. Having considered all the evidence, I am of the view that Liu Tim Man did mention renting the 2^nd Property (front portion) at the monthly rental of HK$60,000 in the 2013 Meeting, Ds did offer to let the property to Liu Tim Man at the figure proposed by Liu Tim Man, but Liu Tim Man eventually declined to take up a lease at that monthly rental.

94.  As to Ps’ claim based upon failure to pay rates, D1 mentioned the following background in his witness statement:

“57. In about 1994, the Government issued Rate Demand Notes to the land owners of Sheung Shui Wai, Sheung Shui, New Territories, Hong Kong. The village representatives and village elders of Sheung Shui Wai told all the villagers not to pay the rate as demanded and they would negotiate with the Rural Committee and the Government to cancel the Rate Demand Notes.

58. At the material time, there was a widespread and concerted movement among indigenous villagers to fight for rates exemption in order to protect their lawful and traditional rights and interests.

59. In meetings of members of [LWST], it was agreed by members to withhold payment of rates pending negotiation with the Government which if successful would bring long term benefit to indigenous villagers as a whole and to members of [LWST] in particular.

60. [LWST] appointed [TK], the treasurer to deal with the matter. [TK] engaged lawyers to negotiate with the Government, in particular to the levy of rate on the properties of [LWST] in the village used as the commune enjoyment of members. The negotiation with the Government failed in the end. The Government claimed against [LWST] for payment of outstanding rates by legal action.”

95.  There is no evidence contradicting this background. I accept that this is the background concerning the failures to pay rates by LWST.

96.  As a whole, I am of the view that D1 is a forthcoming witness. His evidence is unsatisfactory on the following matters: (a) D1 has not given clear evidence on the Ding Payments issue; and (b) D1 also could not tell the details of the meetings in which P4 had requested for documents. D1 no longer has a clear memory of these matters. However, as to his evidence on the other matters, his evidence is supported by contemporaneous documents and is inherently probable. To the extent indicated above, I accept his evidence.

E6. TK

97.  TK is one of the two treasurers of LWST. He is responsible for the lease matters of the properties of LWST, focusing on the agricultural lands in the village area. In his witness statements, TK said:

“5. It is the long and established practice of [LWST] that the Tong will discuss the tenancies which will be expired in the coming year and discuss in the annual meeting the lowest limit for the treasurers to negotiate with the tenant. If any member does not agree to the lowest limit for a particular property and states a certain sum be the market rent, the Tong will let the property to him at the rent suggested by him and allow him to sub-let the property for profit. The Plaintiffs has never objected to any lowest limit as discussed for the renewal of the tenancies of any properties of the Tong.

6. [The 1^st Property] is a small piece of agriculture land. This piece of land has been let to the tenant for more than 40 years. If we evict the tenant, the tenant will demolish all the structures erected by him thereon. The rent of such a small piece of agriculture land shall not be $17,000.00 per month at 2014. If [Ps] like to rent this piece of land at this price, we will evict the existing tenant and let to them. This is the usual practice of the Tong, that is, if any member object to the letting of any property at any rent and suggest that a certain rent should be charged. The Tong will let the property to him at the rent suggested by him and allow him to sub-let to earn a profit.

7. In respect of the matter for the payment of arrears of rate and Government Rent, I have been acted in according to the instruction given by the Tong and the Tong has ratified my action.

8. All the members have been told to approach me for any enquiry of the lease matters of the properties in the village and the agricultural land of the Tong. [Ps] had never approached me before they took out the Action herein.”

98.  Under cross-examination, TK was asked whether other tenants had ever been considered for the 1^st Property. TK answered that if the existing tenant did not pay rent, LWST would repossess the 1^st Property, but there was never any non-payment of rent. He therefore never sought estate agents to put up the 1^st Property for lease.

99.  As to P4’s requests for documents in the meetings of LWST, TK did not have a clear memory of the details relating to those requests.

100.  TK’s evidence is straightforward. Save and except that he could not tell the details relating to P4’s requests for documents, TK’s evidence is clear and cogent. His evidence remains unshaken after cross-examination. I accept his evidence. I would also add that the practice mentioned by TK in [6] of his witness statement is in accordance with common and commercial sense. I also note that none of Ps’ witnesses has denied the existence of this practice in his evidence.

E7. CF

101.  CF is the other treasurer of LWST. He is responsible for the lease matters of the properties of LWST in the town area. In his witness statements, CF said:

“7. It is the long and established practice of [LWST] that the Tong will discuss the tenancies which will be expired in the coming year and discuss in the annual meeting the lowest limit for the treasurers to negotiate with the tenant. If any member does not agree to the lowest limit for a particular property and states a certain sum be the market rent, the Tong will let the property to him at the rent suggested by him and allow him to sub-let the property for profit. [Ps] has never objected to any lowest limit as discussed for the renewal of the tenancies of the 2^nd Property and the 3^rd Property and any other properties.

8. All the members have been told to approach me for any enquiry of the lease matters of the properties in the town of the Tong. [Ps] had never approached me before they took out the Action herein.”

102.  In his oral evidence, CF mentioned the following:

(1) He handled the leasing matters of the 2^nd Property and the 3^rd Property.

(2) He was in the 2013 Meeting. In that meeting, Liu Tim Man said that he would rent the 2^nd Property at HK$60,000. However, when LWST was prepared to let the 2^nd Property to Liu Tim Man at the rental suggested by him, Liu Tim Man refused to take up the lease.

(3) After 2011, before leasing out the 2^nd Property and the 3^rd Property, CF would contact two to three estate agents to check the market rentals. He would contact the estate agents in the vicinity of the relevant property, and would not, for instance, contact estate agents as far away as in Fanling. He had no need to sign agency agreements with the estate agents.

(4) As to the agency fee, usually the tenant would pay a fee equivalent to one-month rental, and the landlord would pay a fee equivalent to half-month rental.

103.  CF said that in the meetings of LWST, the documents requested by P4 were shown to him. This part of CF’s evidence is contradicted by the Transcripts. In respect of P4’s requests for documents, I prefer P4’s evidence to CF’s evidence.

104.  Save and except his evidence relating to P4’s requests for documents, CF’s evidence is inherently probable and not contradicted by any reliable evidence. CF’s evidence is accepted to this extent.

E8. D2

105.  D2 has been a manager of LWST since around 18 July 1977. At the time of the trial, he is about 85 years old. In his evidence, D2 said that it was the long and established practice of LWST that the members would discuss the tenancies which would expire in the coming year and set the lowest acceptable rentals in the annual meeting of LWST. The treasurers would then negotiate with the tenants based upon the lowest acceptable rentals set in the meeting. D2 also said that if any member had an objection to the lowest acceptable rental of a particular property set in the meeting and said that the rental should be a higher figure, the member had the right to rent the property at the lowest acceptable rental set by the meeting, and then the member might sublet the property to a subtenant.

106.  Mr Chau suggested to D2 that this practice did not exist. D2 did not agree. The basis of Mr Chau’s suggestion is that no such discussion in the Transcripts. However, as mentioned in the above, the transcript of each meeting may not capture the entire meeting. Further, none of Ps’ witnesses said that there was no such practice in LWST. I am also of the view that the practice mentioned by D2 is in accordance with common and commercial sense. I accept D2’s evidence on this point.

107.  D2 also said that in the 2013 Meeting, Liu Tim Man said that he would rent the 2^nd Property at the monthly rental of HK$60,000. However, when LWST was prepared to let the 2^nd Property to him at that monthly rental, Liu Tim Man refused to take up the lease. I have no reason to doubt D2’s evidence.

108.  Regarding the meetings of LWST, due to the advanced age of D2, most of the matters concerning the meetings were handled by D1. D2 said that documents of LWST would be produced in the meetings for members’ inspection. Further, members of LWST might ask the treasurers if they wanted to see the documents of LWST. However, as to the matters concerning P4’s requests for documents, it is obvious that D2 could not recall the details.

109.  In my view, save and except the matters concerning P4’s requests for documents, in respect of the matters which he could remember, D2’s evidence is reliable. I accept his evidence to this extent.

F. ANALYSIS

F1. Agent/Trustee/Helper – Any legally enforceable obligations?

110.  D1’s duties as suggested by Ps in Agreed Issues 1 to 3 are based upon the alleged role of D1 as “Agent/Trustee/Helper” as pleaded in [14] to [16] of the Re-Amended Statement of Claim. The first question which needs to be answered is whether the obligations as pleaded in [14(a)] and [14(b)] of the Re-Amended Statement of Claim (“the Obligations”) are legally enforceable obligations.

111.  I have to say that Ps have failed to plead any basis in support of the proposition that the Obligations are legally enforceable obligations.

112.  Mr Chau submits:

(1) A relationship of principal and agent may be constituted by the conferring of authority by the principal on the agent, which may be implied from the conduct or situation of the parties, and may or may not involve a contract between them.[26]

(2) An agreement between a principal and agent for the conferral of authority may be implied in a case where one party has acted towards another in such a way that it is reasonable for that other to infer from that conduct assent to an agency relationship.[27]

(3) Assent of the principal may be implied when the principal places another in such a situation that, according to ordinary usage, that person would understand themselves to have the principal’s authority to act on the principal’s behalf. The assent or consent of the agent is also required.[28]

113.  I have no quarrel with these propositions. However, in this case, in order to found a claim against D1 by relying upon the Obligations, Ps must lay a foundation upon which Ps could say that the Obligations are legally enforceable obligations. In my view, legally enforceable obligations would arise if:

(1) the Obligations are based upon a legally binding agreement, i.e. an agreement supported by consideration[29]; or

(2) D1 is estopped from denying that the Obligations are legally enforceable obligations.

114.  It is trite that except in the case of negotiable instruments, consideration in support of a binding agreement (which is not under seal) must be pleaded.

(1) Hong Kong Civil Procedure 2023, Volume 1, §18/12/4:

“…… If the agreement is not under seal, the consideration also must be pleaded. ……”

(2) Hong Kong Civil Procedure 2023, Volume 1, §18/12/8

“Consideration - If this is for any agreement not under seal, it is a material fact and must be pleaded, except in the case of negotiable instruments, where it is presumed. ……”

(3) In Huen Wai Kei v Choy Kwong Wa Christopher (No 2)[30], Kwan JA (as she then was) said:

“60. Order 18 r.7(1) of the Rules of the High Court (Cap.4A, Sub.Leg.) stipulates that every pleading must contain a statement in a summary form of the material facts on which the party pleading relies for his claim or defence. Hong Kong Civil Procedure 2014, Vol.1, para.18/12/7 reads as follows: “(6) Consideration - If this is for any agreement not under seal, it is a material fact and must be pleaded, except in the case of negotiable instruments, where it is presumed.” No authority was cited in the commentary for this proposition, but Mr Chain was able to refer us to Clarke v Gray (1805) 6 East 564, which was mentioned in an old edition of Bullen & Leake & Jacob's Precedents of Pleadings (13th ed, 1990) p.269, and the relevant passage is as follows: “The consideration necessary to the validity of a simple contract must in general be shown upon the statement of claim (Myddleton v Lord Kenyon (1794) 2 Ves Jr 391, 408; Clarke v Gray (1805) 6 East 564). But consideration need not be pleaded for agreements under seal, bills of exchange, promissory notes and cheques.”

61. The Security & Set-Off Agreement, which was made orally, was not an agreement under seal. In Clarke v Gray at 568, Lord Ellenborough CJ had this to say about an agreement not under seal:

“It is no more necessary to state every part of an agreement not under seal, each part making a distinct contract, than it is of an agreement under seal: it is sufficient in either case to state so much of each as constitutes that contract, the breach of which is complained of, prescribes the duty to be performed, and the time, manner, and other circumstances of its performance: with this difference only, that in the case of an agreement, not under seal, the consideration must be stated, and no part of the entire consideration for any promise contained in the agreement can be omitted.”

62. Mr Bell submitted this old authority should be treated with circumspection as the law on consideration has developed since. We are inclined to think the passage quoted above on the pleading of consideration remains good law. Consideration for the Security & Set-Off Agreement is a material fact and should have been pleaded by the plaintiffs. This was not done in para.8 of the consolidated statement of claim, which has been set out in full in the earlier part of this judgment.” (Emphasis added)

(4) In Kwok Chin Wing[31], Ma CJ said:

“19. …... an agreement to establish a case on the basis of joint and several liability must — like any other agreement — be properly pleaded: when and how the agreement was made, its material terms, the consideration therefor, breach, the sum due thereunder, and where appropriate, damages.” (Emphasis added)

115.  No consideration in support of the Obligations has been pleaded in the Re-Amended Statement of Claim. I note that in the Re-Amended Defence, it is pleaded that the helper would be entitled to have 10% of the net rental incomes from the 15 Units. However, this is denied by Ps in [3] of the Amended Reply. In other words, in Ps’ pleaded case, it is denied that the Agent/Trustee/Helper would be entitled to have some rental incomes in return for his work.

116.  Mr Chau submits that notwithstanding Ps’ denial in [3] of the Amended Reply, the court may accept that the Agent/Trustee/Helper would be entitled to have 10% of the net rental incomes as remuneration as suggested by D1, and at the same time accept the other matters concerning the Agent/Trustee/Helper as contended by Ps. The court is entitled to take this approach, for the essence of any rule of procedure is fairness.[32] D1 would not be taken by surprise if the court accepts that the Agent/Trustee/Helper would be entitled to have remuneration as suggested by him. With respect, it would only be necessary for me to say that based upon the evidence accepted by this court, I find that the role of the helper is the one mentioned by D1 in his evidence, ie he is only required to take care of the 15 Units and not Lot 415. He is entitled to have 10% of the net rental incomes from the 15 Units as remuneration. In view of this finding, it would not be necessary to consider the point made by Mr Chau mentioned in the above.

117.  Regarding estoppel, it is also trite that estoppel must be pleaded.

(1) Hong Kong Civil Procedure 2023, Volume 1, §18/8/15:

“Estoppel must be specifically pleaded …… This principle applies equally whether estoppel is pleaded as a defence or a cause of action. ……”

(2) In Li Kwai Fong Ah Pat v Bachy Soletanche Group[33], Penlington JA said:

“8. …… we are bound by pleadings not to consider the possibility of estoppel. An estoppel must be specifically pleaded before it can be entertained. It was not. ……”

118.  It is clear that neither consideration in support of the Obligations, nor any estoppel has been pleaded by Ps. In the absence of a properly pleaded binding agreement or estoppel, I do not see any basis upon which Ps may say that the Obligations are legally enforceable obligations. I have posed this question to Mr Chau at the final submissions stage. Mr Chau submits that a gratuitous agent may be held liable to the principal in some circumstances.[34] The principle has been summarized in Bowstead & Reynolds on Agency (22^nd Ed), §6-027:

“A gratuitous agent will be liable to the principal if in carrying out the work the agent fails to exercise the degree of care which may reasonably be expected of the agent in all the circumstances.”

119.  With respect, I am of the view that Ps cannot derive any assistance from this principle. In Ps’ pleadings, it has not been pleaded (a) what degree of care is reasonably expected of D1 in the circumstances; (b) what are the relevant circumstances; (c) in what way D1 has failed to exercise such degree of care. With the absence of all these matters in Ps’ pleadings, the principle concerning gratuitous agent has no application in this case.

120.  In my judgment, Ps have failed to plead a proper basis upon which the Obligations could be said as legally enforceable obligations. For this reason alone, the claims based upon the alleged role of “Agent/Trustee/Helper” of D1 as pleaded in the Re-Amended Statement of Claim must fail.

F2. Lot 415

121.  Without prejudice to the above, based upon the evidence accepted by this court, I find that the Obligations do not include the obligation to look after and to manage Lot 415. Accordingly, in any event, the claim made by P1, P2 and P3 against D1 in respect of matters concerning Lot 415 cannot succeed.

122.  Further, in respect of the claim for 1/5 of the sum HK$780,850 by P1, and the claim for 1/5 of the said sum by P2[35], I am of the view that these claims cannot be allowed. P1, P2 and P3’s case is that the reinstatement costs of HK$780,850 were incurred because D1 had not duly performed the Obligations, and hence the reinstatement costs should be borne by D1 personally and not by the 5 Fongs. P1, P2 and P3 in fact are saying that had D1 duly performed the Obligations, the Unlawful Occupation Event would have had never occurred. However, they have not pleaded, and they have not proved, what D1 had failed to do, causing the Unlawful Occupation Event. Failure to plead the material facts in support of this causation point and to prove the causation by evidence is fatal to P1, P2 and P3’s claim for parts of the HK$780,850.

123.  The importance of proving causation is illustrated by the Court of Final Appeal’s decision in Man Ping Nam & Another v Man Fong Hang[36]. In that case, the managers of a wui sold a piece of land owned by the wui. The plaintiff, a member of the wui, sued the manager for breach of trust on the basis that the sale was at a gross undervalue. The plaintiff succeeded in the Court of First Instance and the Court of Appeal. However, the Court of Final Appeal allowed the managers’ appeal and ruled against the plaintiff. One of the points made by the Court of Final Appeal in their judgment is that the plaintiff had failed to prove causation. In the judgment, Litton NPJ said:

“Causation

62. A charge of breach of trust by persons in the role of trustees does not hang in the air. It is grounded upon loss. And it is for the party alleging loss to prove that the wrong caused the loss. As at common law with regard to an award of damages, the liability in equity to pay compensation for loss is fault-based : see Target Holdings Ltd v Redferns [1996] 1AC 421 at 432G, per Lord Browne-Wilkinson. The plaintiff adduced no evidence at trial to show that any of the matters, said to amount to failure of due diligence and reasonable care, caused any loss to the Wui. It was said, for example, that the managers had failed to “undergo a price discovery process”. This expression, used to denote bargaining in, say, commodities exchanges, is hardly appropriate for this piece of land. This unique piece of New Territories land had been “in the market” since 1992: a fact which must have been well-known to brokers dealing with rural land in the New Territories. It could not have been mere coincidence that, shortly after the District Officer had (after a delay of some four years) given his consent to sell, interest from potential purchasers revived.

63. It was also said that the managers had failed to consult Mr George Yip, the solicitor who had sought consent from the District Officer on the Wui’s behalf. But what advice might Mr Yip have given regarding the sale or the mode of sale? Mr Yip was never called as a witness. In the courts below the managers were charged with failure to offer the land for sale by public tender. But no evidence was led that if they had adopted this process they would have got a better price. In this Court Mr Jat SC, counsel for the respondent, said he was not relying on this.

64. Take another example. The managers failed to “cross check” Earning Youth’s offer with a valuer. Assuming they did and had gone to Mr Gilbert Yuen of Vigers : the advice they would have got, presumably, would have been that the land was worth not more than $283,000,000. Take yet another example : the managers’ failure to bargain with Earning Youth. It is pure speculation as to whether they would have obtained a better price if they had bargained. But one thing is certain. If the process had dragged on into October 1997 they would have met the collapse of the market, following the Asian financial crisis.

65. In my judgment, the evidence led at trial failed to show any loss to the Wui. Criticisms of the managers’ conduct remained as such. They did not show that the managers’ action, or inaction, caused loss. Hence, the award of equitable compensation must be set aside.” (Emphasis added)

124.  Bearing in mind that Lot 415 is a large piece of agricultural land in a remote area, even assuming that the Obligations are legally enforceable obligations and looking after Lot 415 is part of the Obligations, P1, P2 and P3 have to plead and to prove:

(1) what D1 has failed to do, causing the Unlawful Occupation Event;

(2) whether the actions suggested by P1, P2 and P3 could prevent the occurrence of the Unlawful Occupation Event;

(3) whether it is reasonable to expect or to require D1 to take the actions as suggested by P1, P2 and P3;

(4) whether any costs would be incurred in taking those actions;

(5) Had those actions been taken by D1 while he was the Agent/Trustee/Helper from 1992 to 1997, and from 2003 until about 2010[37], what would be the total amount of costs incurred in taking the actions suggested by P1, P2 and P3.

125.  In my view, all the aforesaid matters are important matters. For example, if it is suggested that D1 himself should patrol the area on a daily basis, this suggestion certainly would not be reasonable. If it is suggested that D1 should engage a management company to manage Lot 415, costs would be incurred. If before the occurrence of the Unlawful Occupation Event, the total of the costs incurred would be more than HK$780,850, causation is not proved.

126.  As to P1 and P3’s claim for the HK$129,106.60 as set out in [11(4)] above, the points set out in the above are also applicable. I also find that in late 2013 or early 2014, D1 has in fact recovered possession of Lot 415. D1 has recovered possession of Lot 415 before the commencement of HCA 313/2014 by P1 and P3. Hence, it is unnecessary for P1 and P3 to start that action.

127.  For the sake of discussion, even if HCA 313/2014 is necessary, I am of the view that the legal costs incurred by P1 and P3 in that action should be borne by all the co-owners of Lot 415, not by D1 personally. Lot 415 is a piece of land co-owned by the descendants of Liu Hon Fun. As a matter of law, each and every co-owner would have the right to enjoy Lot 415, and would also have the obligation to manage the land and to bear the expenses incurred in managing the land.

F3. Ding Payments

128.  In respect of the Ding Payments, I have set out my finding in [88] above. However, notwithstanding this finding, because of the case put forward by P1, P2, P4 and P5 in their pleadings and in the Joint Statement of Issues, I am unable to make a ruling in favour these plaintiffs on the Ding Payments issue.

129.  Reading the Re-Amended Statement of Claim carefully, it is clear that D1’s duty to collect the Ding Payments and to distribute the same to P1 and P2 as head of their respective Fongs ties in with the Agent/Trustee/Helper role of D1 as contended by P1, P2, P4 and P5. This position is restated in Agreed Issue No.3. See [34(3)] above. While there is no pleaded basis upon which the Obligations can be said as legally enforceable obligations, it is difficult to see how the relevant plaintiffs can hold D1 liable in respect of the Ding Payments.

130.  I am not saying that P1, P2, P4 and P5 do not have a way to hold D1 liable for the Ding Payments. The important point is whether a proper legal basis has been pleaded in support of the claim for Ding Payments. Mr Chau submits that D1 should be held to his own pleadings and cannot rely upon the Alleged Settlement as a defence to P1’s claim for the Ding Payments. Mr Chau is correct on this point. However, while D1 should be held to his own pleadings, the same would also apply to Ps’ side. In the absence of a properly pleaded basis in support of the Ding Payments issue as contended by P1, P2, P4 and P5, I cannot allow this claim.

131.  I have considered whether I should make an order in favour of P1 and P2, while the evidence shows that there are some Ding Payments in D1’s possession, which might well be P1 and P2’s entitlements. Having considered the matter, I decline to do so.

(1) It is trite that issues are defined by pleadings, not by the evidence.

(2) If P1 and P2 should be allowed to rely upon a basis which has not been spelt out in their pleadings to recover the Ding Payments (for example, unjust enrichment), D1 should also be allowed to raise unpleaded matter(s) as a defence to that claim (for example, change of position by reason of the Alleged Settlement). Introducing all these unpleaded issues is contrary to the established principles. It would not be possible to resolve these issues fairly, while there has not been any discovery on these matters, and the parties have not been given any opportunity to adduce evidence on the matters.

F4. Disclosure of Documents

132.  Based upon the evidence before the court, I am satisfied that P4 has requested to see the tenancy agreements, the bank statements, and the evidence relating to the income and expenditure of LWST in the 2014 Meeting, in the 2015 Ching Ming Meeting (no matter whether this is a formal meeting of LWST or not), the 2015 December Meeting, and in the 2016 Meeting. P4 was only allowed to inspect some documents but not all the documents requested by him.

133.  By WH’s letter dated 16 February 2015 to D1, WH on behalf of P1 and P2 requested for copies of all tenancy agreements of the 2^nd Property and the 3^rd Property for 2012, 2013 and 2014. These tenancy agreements had not been provided to P1 and P2 before the commencement of these proceedings.

134.  By WH’s letter dated 13 February 2017 to D1, WH on behalf of P1 and P2 requested for the production of “all tenancy agreements, bank statements and documents relating to the income and expenditure of [LWST] for the years [2012 to 2016]”. WH also wrote a letter to D2 on the same date, making the same request. The request has not been acceded to by Ds before the commencement of these proceedings.

135.  After the commencement of these proceedings, Ds have disclosed the following documents:

(1) some tenancy agreements provided under the letters of Messrs Ko & Chow, solicitors for Ds, dated 14 August 2017 and 7 April 2018;

(2) Bank statements in relation to shares; and

(3) LWST’s bank passbook showing the balance from 31 August 2018 to 6 December 2019

136.  Mr Chau submits that notwithstanding the disclosure made by Ds in these proceedings, Ds have not produced the underlying documents substantiating individual items of income and expenditure. Using the LWST’s annual accounts for 2018 as an example, Mr Chau submits that the total income and the total expenditure in that year are substantial. There are rent receipts for many properties, and numerous items of expenditure. The underlying documents, including bank documents for individual deposits and withdrawals, cheques, invoices, and receipts. These have not been disclosed. Mr Chau also submits that in D1’s evidence, D1 mentioned that some transactions would go through the treasurers’ personal accounts. The relevant treasurers’ personal accounts have also not been produced.

137.  The disclosure order sought by Mr Chau at the end of the trial is different from the one set out in the Re-Amended Statement of Claim. In the Re-Amended Statement of Claim, under prayer (k), the order sought is “[a]n order for delivery of all bank statements, tenancy agreements and documents relating to income and expenditure of [LWST] for inspection by [P1 and/or P2]”. However, the relief now sought by Mr Chau in Ps’ Closing Submissions dated 28 April 2023 is that “within 60 days, an order for delivery of all bank statements, tenancy agreements and documents relating to income and expenditure, from 18 July 1977 to the date of this order, of [LWST] for inspection”.[38] (My Emphasis)

138.  Mr Chau submits that D2 was appointed as a co-manager of LWST on around 18 July 1977. D1 became a manager since 7 October 1992. While Ds are jointly liable under the order, it is within D1’s power to obtain documents before he himself became manager. Hence, P1 and P2 are now seeking a disclosure order against Ds, requiring them to produce documents from 18 July 1977 onwards. Mr Chau says that the scope of the disclosure order proposed by him at the end of the trial is narrower than the scope of the one set out in the Re-Amended Statement of Claim. As the greater includes the less, P1 and P2 are entitled to seek the order in terms of the one proposed at the end of the trial.

139.  With respect, in my view, P1 and P2 have enlarged the scope of the disclosure order sought by them in the final submissions. The disclosure order sought in the Re-Amended Statement of Claim must be read in context. Reading that proposed order in the pleading in context, the scope of that proposed order would only cover the documents from 2012 to 2016, as the requests for documents as pleaded in the Re-Amended Statement of Claim are relating to the documents in these years only. The scope of the disclosure order proposed by Mr Chau in his final submissions is much larger than the scope of the one pleaded in the Re-Amended Statement of Claim. In my judgment, P1 and P2 should not be allowed to travel beyond their pleaded case. The case which Ds have to meet at the trial is the case as pleaded by Ps in their pleadings, not any other case. The scope of the disclosure claim made by P1 and P2 should not be larger than the one pleaded in the Re-Amended Statement of Claim.

140.  Mr Chau submits that managers are trustees, and subject to Customary Chinese Law, the provisions of the Trustee Ordinance apply to them.[39] I agree with Mr Chau on this point.

141.  As to whether a beneficiary is entitled to have an order compelling the trustees to disclose documents, in Schmidt v Rosewood Trust Ltd[40] [2003] 2 AC 709, the Privy Council held that a beneficiary does not have a proprietary right to disclosure of trust documents. Whether disclosure would be ordered is an exercise of the discretion by the court as part of the court’s inherent jurisdiction to supervise the administration of trusts. The court has to consider carefully in what way the discretion should be exercised. In Schmidt, Lord Walker said:

“67. …… Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary …… may be an important part of the balancing exercise which the court has to perform on the materials placed before it. ……”

142.  The Privy Council’s decision in Schmidt v Rosewood has been expressly approved and followed by the Court of Appeal and hence is the law in Hong Kong and binding upon this court. In Hao Xiaoying v Wong Yiu Lam William and Others[41], Cheung JA said:

“3.26 …… as pointed out in Schmidt v Rosewood Trust Ltd [2003] 2 AC 709, the Court should approach a request by a beneficiary for disclosure of a document in the possession of the trustees in their capacity as such, as one calling for the exercise of discretion rather than an adjudication upon a proprietary right (see Lewin On Trusts 19th Ed at paragraph 23–018).”

143.  In Erceg v Erceg[42], the New Zealand Supreme Court has set out the matters which have to be considered in evaluating how the court’s discretion should be exercised. In [56] of that judgment, O’Regan J said:

“……we consider the matters that need to be evaluated in relation to an application for disclosure of trust documents include the following:

(a) The documents that are sought. Where a number of documents are sought, each document (or class of document) may need to be evaluated separately, given that different considerations may apply to basic documents such as the trust deed and more remote documents such as the settlor’s memorandum of wishes.

(b) The context for the request and the objective of the beneficiary in making the request. The case for disclosure will be compelling if meaningful monitoring of the trustee’s compliance with the trust deed in the administration of the trust could not otherwise occur. In this regard, it may be relevant that disclosure has been made to other beneficiaries. However, assuming no improper motive on the part of the beneficiary seeking information, the fact that disclosure has previously been made to other beneficiaries will rarely be a decisive factor against disclosure.

(c) The nature of the interests held by the beneficiary seeking access. The degree of proximity of the beneficiary to the trust (or likelihood of the requesting beneficiary or others in the same class of beneficiaries benefitting from the trust) will also be a relevant factor.

(d) Whether there are issues of personal or commercial confidentiality. Recognition should be given to the need to protect confidential matters of a personal or commercial nature. The Court should also take into account any indications in the trust deed itself about the need for confidentiality in relation to commercial dealings or private matters in relation to particular beneficiaries.

(e) Whether there is any practical difficulty in providing the information. If the information sought by the person requesting the information would be difficult or expensive to generate or collate, that may be a factor against requiring its disclosure.

(f) Whether the documents sought disclose the trustee’s reasons for decisions made by the trustees. It would not normally be appropriate to require disclosure of the trustees’ reasons for particular decisions.

(g) The likely impact on the trustee and the other beneficiaries if disclosure is made. In particular, would disclosure have an adverse impact of the beneficiaries as a whole that would outweigh the benefit of disclosure to the requesting beneficiary? In the case of a family trust, this may include the possibility that disclosure would embitter family feelings and the relationship between the trustees and beneficiaries to the detriment of the beneficiaries as a whole. However, on the other hand, non-disclosure may have a similar effect.

(h) The likely impact on the settlor and third parties if disclosure is made. The impact that disclosure will have on the settlor and/or on third parties will need to be considered.

(i) Whether disclosure can be made while still protecting confidentiality. This may require that copies of documents supplied to a beneficiary are redacted to ensure non-disclosure of confidential information.

(j) Whether safeguards can be imposed on the use of the trust documentation. Examples would include undertakings and inspection by professional advisers only and other safeguards to ensure the documentation is used only for the purpose for which it was disclosed.” (Emphasis in original)

144.  P1 and P2 would not be entitled to see the documents in Ds’ possession as of right. P1 and P2 are asking the court to exercise the discretion in their favour to order disclosure. That being the case, P1 and P2 would need to plead the material facts based upon which they are requesting the court to exercise the discretion in their favour. It is trite that material facts in support of a claim must be pleaded. See Order 18 rule 7(1).

145.  Having carefully examined Ps’ pleadings, I really cannot find sufficient material facts in support of exercising the discretion in favour of ordering disclosure. P1 and P2’s pleaded case is that they have made various requests for seeing the documents of LWST, but those requests were refused by Ds. By not letting them to see the documents requested, Ds have breached the duties as pleaded in [21(d), (e), and (g)] of the Re-Amended Statement of Claim.

146.  Bearing in mind that P1 and P2 are not entitled to have disclosure from Ds as of right, the fact that Ds have refused, or Ds have not fully complied with the requests for disclosure made by P1 and P2, without anything more, would not be sufficient in support of exercising a discretion in favour of ordering disclosure. At the very least, P1 and P2 have to set out the following in their pleaded case:

(1) the documents that are sought with particulars;

(2) the objective(s) of P1 and P2 in making the request; and

(3) the disclosure sought would be beneficial to the administration of LWST.

147.  Clearly, P1 and P2 have not pleaded the aforesaid in their Re-Amended Statement of Claim. As to (a) whether any single piece of paper (or any soft copy stored in a computer) containing any information concerning the income or expenditure of LWST from 2012 to 2016 (or from 18 July 1977 onwards, according to the stance stated in [214] of Ps’ Closing Submissions); (b) why such a wide range of disclosure is necessary; (c) whether and why such a wide range of disclosure would be beneficial to the administration of LWST, there is not a word on these matters in the Re-Amended Statement of Claim.

148.  I now turn to the evidence. By looking at the evidence adduced by Ps, I could not see a clear reason why the discretion should be exercised in favour of ordering disclosure.

(1) As said in the above, the mere fact that Ds have not complied with or fully complied with the requests made by P1 and P2 cannot be a sufficient reason in support of ordering disclosure, bearing in mind that a beneficiary is not entitled to have a disclosure order as of right.

(2) In WH’s letter dated 16 February 2015[43], it is said:

“By reason of the fact that you have purposely leased out the aforesaid premises at a rent far below the market rent, you have acted in breach of your fiduciary duty to the members of [LWST]. Our client has requested copies of the tenancy agreement in respect of the above premises but have not been supplied with the same.” (Emphasis added)

That D1 “[has] purposely leased out [the Properties] at a rent far below the market rent” has not been pleaded in the Re-Amended Statement of Claim. At the final submissions stage, in response to the question from the court, Mr Chau has made it clear that there is no such allegation against D1 in this case. Mr Chau’s clarification is fair and important. The allegation made in the said letter against against D1 is a serious allegation, accusing D1 of doing something deliberately at the expense of LWST. That allegation would be equivalent to an allegation of misconduct or even fraud. The allegation would only be considered if it is pleaded distinctly and with the utmost particularity.[44] Since the allegation has not been pleaded, it would not be considered and cannot be a reason in support of exercising the discretion in favour of ordering disclosure.

(3) Apart from the aforesaid letter, all the other evidence only shows that there has been requests for documents from P1 and P2, but Ds have refused to fully comply with those requests.

149.  Since P1 and P2 are asking the court to exercise a discretion in their favour, they bear the burden of pleading and proving the material facts in support of their request. For the reasons above, P1 and P2 have failed to discharge this burden. As a result, there is no basis upon which I may exercise my discretion to order disclosure. The disclosure claim would be dismissed.

F5. Alleged Letting Out at Undervalue

150.  Based upon the evidence accepted by the court, I find that:

(1) The 1^st Property has been let out by LWST to the tenant for more than 40 years. It is a piece of agricultural land. TK, the treasurer of LWST responsible for the leasing matter of this property, has a belief that the tenant would demolish all the structures of the land when the tenant return possession of the property to LWST. The tenant has paid rent continuously in the past decades, and TK never sought estate agent to put up the 1^st Property for lease.

(2) If any member of LWST is willing to pay a higher monthly rental to rent the 1^st Property, LWST would evict the current tenant and let that member to rent the property at the rental proposed by him.

(3) As to the 2^nd and the 3^rd Properties, after 2011, before leasing out the properties, CF would contact two or three estate agents in the vicinity of the properties to ascertain the market rentals. The proposed rentals for the new tenancies would be discussed in the annual meeting of LWST. If any member is willing to rent a property at a higher rent, LWST would let the property to that member at the rent proposed by that member.

(4) In the 2013 Meeting, Liu Tim Man said that he would rent the 2^nd Property at the monthly rent of HK$60,000, which was higher than the rental proposed by the treasurer. LWST agreed to let the 2^nd Property to Liu Tim Man at the monthly rent of HK$60,000. However, Liu Tim Man refused to take up the lease at that figure.

151.  In respect of this claim made by P1 and P2, both sides have adduced experts’ evidence. Mr Chau has helpfully summarized the experts’ evidence in a table in Schedule 2 to Ps’ Closing Submissions dated 28 April 2023. A simplified version of the table is as follows:

	Lease Period	Monthly Rent in Lease (HK$)	Market Rent (HK$) in Joint Expert Reports (where the expert valuation was higher than the rent in the lease)	Valuation Date in Expert Reports
1st Property	1/4/2013 to 31/3/2015	250	17,400 (Ps’ Experts’ Valuation) 3,900 (Ds’ Experts’ Valuation)	1/4/2013
	1/4/2015 to 31/3/2017	1,000	18,400 (Ps’ Experts’ Valuation) 3,500 (Ds’ Experts’ Valuation)	1/4/2015
	1/4/2017 to 31/3/2019	4,000	18,800 (Ps’ Experts’ Valuation) 4,100 (Ds’ Experts’ Valuation)	1/4/2017
2nd Property (Front Portion)	1/1/2011 to 31/12/2013	20,000	30,800 (Adopted Monthly Rental[45])	1/1/2011
	8/2/2014 to 7/2/2017	50,000
	25/3/2016 to 31/3/2019	45,000	66,600 (Ps’ Expert’s Valuation) 51,000 (Ds’ Experts’ Valuation)	24/3/2016
2nd Property (Rear Portion)	1/12/2011 to 31/10/2015	4,500
	1/12/2015 to 31/12/2018	7,500
2nd Property (Cockloft)	1/7/2012 to 30/6/2014	4,800	9,800 (Ps’ Expert’s Valuation) 6,300 (Ds’ Expert’s Valuation)	1/7/2012
	1/7/2014 to 30/6/2016	6,800	9,350 (Adopted Monthly Rental)	1/7/2014
	1/1/2017 to 31/12/2019	7,500	10,950 (Adopted Monthly Rental)	1/1/2017
3rd Property	1/1/2011 to 31/12/2013	36,000	43,650 (Adopted Monthly Rental)	1/1/2011
	1/1/2014 to 31/12/2015	75,000
	1/1/2016 to 31/12/2017	75,000	125,400 (Adopted Monthly Rental)	1/1/2016
	1/2/2018 to 31/1/2022	132,000	208,300 (Ps’ Experts’ Valuation) 141,000 (Ds’ Expert’s Valuation)	1/2/2018

152.  For the reasons given below, for the purpose of determining this claim, it would not be necessary for me to resolve which expert’s valuation should be adopted.

153.  In my judgment, the problem of P1 and P2’s claim is that P1 and P2 have not pleaded that Ds have done something, or Ds have failed to do something, and as a result of these actions or inactions, LWST has suffered a loss. There is also no evidence on this causation issue. See the Court of Final Appeal’s decision in the Man Ping Nam case mentioned in the above.

154.  With respect, in Ps’ pleaded case, P1 and P2 are only saying that Ds have let out the Properties at undervalue. However, P1 and P2 have not addressed the following in their pleadings:

(1) what Ds should have done in order to find out the market rentals of the Properties at the material times;

(2) had those steps been taken, what costs would have been incurred by LWST;

(3) taking those costs into account, whether the letting at undervalue as alleged by P1 and P2 has really caused loss to LWST.

155.  Ps have also not adduced evidence on the aforesaid matters.

156.  It seems that P1 and P2 are suggesting that in order to find out the market rentals of the Properties, it would be necessary for Ds to obtain valuation reports from surveyor(s). However, the following points have not been made clear by Ps:

(1) would it be necessary for Ds to obtain valuation from more than one surveyor;

(2) if yes, when there is a significant difference between the figures given by the surveyors, what should be done in order to find out which figure is the true market rental of a particular property at a certain point of time;

(3) what would be the costs incurred in order to do all the above;

(4) whether the costs incurred would be more than the shortfall in rental incomes by reason of the Alleged Letting Out at Undervalue as alleged in P1 and P2’s case;

(5) taking all the aforesaid into account, whether Ds have really caused loss to LWST by not doing the aforesaid, but just letting out the Properties in the way as described by Ds’ witnesses.

157.  At the final submissions stage, in response to the questions from the court, Mr Chau submits Ds may have some ways to find out the market rentals of the Properties without incurring substantial costs. For example, asking people knowing the market rentals in the relevant areas, or paying modest agency fees to the estate agents. With respect, I am not entitled to guess in the absence of any pleaded material facts and evidence in support thereof.

158.  Ps bear the burden to plead and to prove causation. In my judgment, Ps have failed to plead matters relating to the causation issue and have failed to prove causation. As a result, this claim would be dismissed.

F6. Failure to Pay Rates

159.  As to Ds’ failure to pay rates of some lands of LWST, I accept that the background leading to these matters is the one said by D1 in his evidence, ie the movement among some indigenous villagers to fight for rates exemption in 1994. The village elders and the village representatives in Sheung Shui Wai adopted the tactics of withholding the payments of rates to the Government in the negotiation process. At the end, the negotiation failed, and the Government took prosecution actions in respect of the delay in paying rates.

160.  Regarding the liabilities caused by the non-payment of rates, Ds pleaded the following in Ds’ FBP:

“11. In the meeting of [LWST] held on 31^st December 2013, members agreed to deduct / pay the arrears of rate, interest and costs of Nos. 2, 3 and 4, 15th Lane, Po Sheung Tsuen for the period from 1994 to 1999 and documents relating to rate were present to the meetings held on 31^st December 2013. The annual account recording the said deduction / payment was approval by the members in the meeting.

……

15. In the meeting of [LWST] held on 31^st December 2016, members agreed, inter alia, to pay the rate, interest and costs in respect of Ground Floor of No. 44, 6th Lane, Po Sheung Tsuen and Ground Floor of No. 46, 6th Lane, Po Sheung Tsuen and to reimburse the shortage payment of the arrears of rate, interest and costs of Nos. 2, 3 and 4, 15th Lane, Po Sheung Tsuen for the period from 1994 to 1999. The annual account recording the said payment / reimbursement was approval by the members in the meeting.

16. In a special meeting of members of [LWST] held on 20^th May 2017, members agreed, inter alia, that the legal costs incurred in DCMP 2417/2016 and DCMP 614/2013 and fines imposed by Government in relation to late payment of rates should be paid by [LWST].

17. In the meeting of [LWST] held on 31^st December 2018, members agreed, inter alia, that the legal costs incurred in legal action and fines imposed by Government in relation to late payment of rates should be paid by [LWST].”

161.  These paragraphs are verified by D1’s evidence. There is no evidence contradicting the same. I accept D1’s evidence in this aspect. For ease of reference, the resolutions concerning rates passed in these meeting would be referred to as “the Rates Resolutions” in the paragraphs below.

162.  However, Mr Chau submits the Rates Resolutions are not valid for the following reasons:

(1) these resolutions have not been passed by the unanimous consent of all the members of LWST;

(2) there was no notice to all members of LWST informing them the proposed resolution before each meeting;

(3) there was no voting or agreement in each of these meetings in respect of the relevant resolutions.

163.  With respect, in my view, Ps’ challenges as to the validity of the Rates Resolutions must fail.

(1) Not all members of LWST before the court

(a) P1 and P2 are challenging the validity of the Rates Resolutions passed in the meetings of LWST. The judgment on this issue should be binding upon all the members of LWST. However, P1 and P2 have failed to make all the LWST members as the parties in these proceedings.

(b) In my view, it is essential that all the members of LWST should be parties in this case, when P1 and P2 are challenging the validity of some resolutions passed in the meeting of LWST. Rules of the High Court, Order 15 rule 4(2) provides:

“Where the plaintiff in any action claims any relief to which any other person is entitled jointly with him, all persons so entitled must, subject to the provisions of any written law and unless the Court gives leave to the contrary, be parties to the action and any of them who does not consent to being joined as a plaintiff must, subject to any order made by the Court on an application for leave under this paragraph, be made a defendant. ……” (Emphasis added)

(c) P1 and P2 are saying that the Rates Resolutions are invalid, and they are entitled to have parts of the payments authorized by those resolutions being returned by Ds to them. According to P1 and P2, the payments authorized by these resolutions are from the capital of LWST[46], which could only be paid out if all the members of LWST unanimously agree.

(d) In my view, if Ds have to return the payments authorized by the Rates Resolution, the whole sum (ie all the payments) should be returned to LWST, for the money would be the asset of LWST. All the other members of LWST would be entitled to have the same benefit, for the money would be returned to LWST. In accordance with Order 15 rule 4(2), it is a mandatory requirement that P1 and P2 must join all the other members of LWST as the plaintiffs in this case, and name all the members who do not consent to being joined as plaintiffs as defendants. It is essential to observe and to follow Order 15 rule 4(2). By making each and every member a party in this case, the judgment given by the court would be binding upon each and every member of LWST, and no member can come to the court to reargue the same issue.

(e) Ps may, and in fact should, begin a set of representative proceedings for the purpose of challenging the validity of the Rates Resolution by following Order 15 rule 12.

(f) Ps have not made all the members of LWST as parties in these proceedings. I am aware that non-compliance of Order 15 rule 4(2) shall be treated as an irregularity.[47] Mere non-compliance with Order 15 rule 4(2), without anything more, would not be a sufficient reason for defeating P1 and P2’s claim concerning the Rates Resolutions. However, by not making all the members of LWST as parties in these proceedings:

(i) It is not known whether the majority of the members of LWST are in support of the stance taken by P1 and P2. For the sake of discussion (putting aside the unanimous consent point taken by P1 and P2 at the moment), if the majority of the members of LWST in fact are against P1 and P2 and supporting the Rates Resolutions, by the operation of the irregularity principle, the Rates Resolutions should be regarded as valid notwithstanding the complaints made by P1 and P2.

(ii) The irregularity principle has been explained by Coleman J in WHC Limited trading as Wine High Club and Others v Hong Kong Wine Chamber of Commerce Limited[48]. In that case, the learned judge said:

“D.4 The Irregularity Principle

55. The irregularity principle is a well-settled principle that the court may decline to interfere despite procedural irregularities in the operation of a company. As it was put by Le Pichon J in Yip Peter v Asian Electronics Ltd [1998] 2 HKC 96 (at 102I-103B), the principle really comes to this: the lawfulness of a decision taken by a meeting of members or board cannot be questioned if the only fact alleged to make it unlawful is a mere informality and irregularity and the intention of the meeting is clear. This is particularly so if there is no evidence that the decision of the meeting would have been different if the correct procedure had been observed. Essentially, this is because equity will not interfere where an irregularity has been permitted if it is within the power of the persons who permitted the irregularity at once to correct it by calling a fresh meeting and dealing with the matter with all due formalities.

56. In the Court of Appeal decision of Re Dalney Estates Ltd [2018] 1 HKLRD 409, Godfrey Lam J (at §§19-25) identified the four-fold rationale of the irregularity principle. First, there is the notion that if there was an irregularity in the making of decisions for the company, it is the company which has been done a wrong and the company alone who is the proper plaintiff to bring a suit for redress. Secondly, the court’s traditional policy in the area of company law is that, generally, matters of internal management should be left to the company to be dealt with by its proper organ. Thirdly, when exercising its equitable jurisdiction, the Court generally does not act in vain, so that if what has been done irregularly is capable of being and will inevitably be confirmed by the majority, the Court will not interfere. Fourthly, there is a concern that courts would be unnecessarily inundated with internal disputes of companies if each and every breach of the articles in the conduct of the affairs of the company might be the subject of an action by any shareholder.

57. In Re Hong Kong Sailing Federation [2010] 1 HKLRD 801, Kwan JA explored the scope of exceptions to the irregularity principle. She endorsed the view (at §§48 and 49) that the law will not bother about irregularities at meetings unless there is a chance that they have influenced the result of a vote, and that in addition intervention must be appropriate. The pertinent question was whether a particular dispute was appropriate for determination by an ordinary majority. Thus, a shareholder was allowed to sue where acts were beyond the competence of an ordinary majority, as in the case of ultra vires, illegality or fraud on the minority, or where it was impossible or impracticable for members to sort things out for themselves.”

(iii) If Order 15 rule 4(2) has been followed, the members of LWST who are against P1 and P2 would be named as defendants in these proceedings, and then it can be seen whether the majority of the LWST is against P1 and P2 on the issues concerning the Rates Resolutions.

(iv) If the majority of LWST is in support of the Rates Resolutions, by the operation of the irregularity principle, P1 and P2 cannot successfully challenge the validity of the Rates Resolutions by relying on the complaints pleaded in their case.

(v) Mr Chau submits that the irregularity principle has no operation in this case. The validity of the Rates Resolutions should be governed by Chinese law and custom. According to the Chinese law and custom, The Rates Resolutions cannot be valid in the absence of any notice to all the members of LWST. Mr Chau is relying upon Foo Tak Ching, The Manager of Wah Yan Mo Fan Heung v Tang Man Kit[49] in support of these submissions.

(vi) With respect, I am unable to accept these submissions. In Foo Tak Ching, there is expert evidence concerning the Chinse law and custom governing the operation of a business tong. In this case, Mr Chau has fairly accepted that LWST is not a business tong, but is a family tong. However, Mr Chau submits that the situation would be the same. In my view, in the absence of any expert evidence on the point, I would not be able to accept the point made by Mr Chau. In the absence of any pleading mentioning the relevant Chinese law and custom, and in the absence of any expert evidence concerning the relevant Chinese law and custom, it would not be appropriate to say that in determining any resolution passed in a meeting of LWST, the common law principles (including the irregularity principle) have been displaced or overridden by Chinese law and custom.

(vii) For the reasons above, in my view, it would not be just and fair to entertain Ps’ challenges against the Rates Resolutions in these proceedings, while the requirement in Order 15 rule 4(2) has not been observed.

(2) Unanimous consent

(a) Mr Chau argues that for distribution of capital (as well as the sale of Tso land), unanimous consent of all the LWST members is required.[50] In the absence of some special consideration, the incidence of payments from income or capital is a matter of law. The trustees must debit each item of expenditure either against income or against capital. The general rule is that income must bear all ordinary outgoings of a recurrent nature, such as rates and taxes, and interest on charges and encumbrances. This includes expenses inherent in the property put into settlement, such as the interest on paramount incumbrances or the outgoings on trust leaseholds. Capital must bear all costs, charges and expenses incurred for the benefit of the whole estate.[51] Generally, payment of legal costs are from capital.[52]

(b) Mr Chau’s point is that the Rates Resolutions can only be passed by unanimous consent of all the members of LWST, for the payments authorized by these payments would be from the capital and not from the general income of LWST. With respect, Mr Chau is not entitled to take this point, for the point has not been raised by P1 and P2 in their pleadings at all.

(c) Mr Chau submits that the unanimous consent point in fact has been pleaded. Mr Chau refers me to the Amended Reply, [17(2)(c)], [17(3)(b)], [18(4)], and [19(2)]. All these paragraphs are in similar terms. For the present purpose, it would be sufficient to only cite [17(2)(c)], which is as follows:

“It is further averred that there was no voting at all during the 30 December 2013 Meeting, let alone an unanimity of all members of [LWST], which is required as a deduction and/or reimbursement would be effectively a distribution of funds of [LWST].” (Emphasis added)

Reading the paragraph fairly, “which is” in the paragraph in fact is referring to “no voting”.

(d) In my view, the unanimous consent point now taken by P1 and P2 as summarized in the above has not been raised by them in the pleadings. Whether the payments authorized by the Rates Resolution are from the general income or from the capital of LWST is not a pure question of law, but is a question involving facts and law. Without raising this matter in the pleadings, Ds have not been given an opportunity to adduce evidence on the matter, and there has not been any discovery on this issue. It would be unfair to Ds if P1 and P2 are allowed to rely upon this point at the trial. I would not allow P1 and P2 to rely upon this point as a ground to challenge the validity of the Rates Resolution.

(e) Further, I would also say that the unanimous consent point now raised by P1 and P2 is inconsistent with their own case. P1 and P2’s case is that each of them is entitled to have 1/20 of the compensation paid by Ds to LWST. According to their case, the Rates Resolutions are invalid, and all the payments made by LWST under these resolutions should be returned by Ds, and each of P1 and P2 should be entitled to have 1/20 of the money returned. If the unanimous consent point is right, Ds would have to return all the payments to LWST. The money would be part of the capital of LWST. Given that at least Ds would not agree with giving P1 and P2 any compensation, it would not be possible for P1 and P2 to have any part of the payments returned by Ds.

(f) A further point relating to the unanimous consent suggested by P1 and P2 is that some members of LWST may not agree with the unanimous consent point now made by P1 and P2. Those members may have the view that the payments authorized by Rates Resolution should be returned by Ds to LWST in one lump sum, and the sum can and should be distributed to the members of LWST if the majority of the members, or the majority present in a meeting of LWST, is in agreement with the distribution. Without following Order 15 rule 4(2), the members who do not agree with the unanimous consent point would have no opportunity to argue the matter in this case.

164.  Without prejudice to the above, bearing the background leading to the failure to pay rates in mind, I would not think that Ds have failed to discharge their duties as managers of LWST in this matter. After all, Ds were acting in accordance with the consensus of the village elders and village representatives in Sheung Shui Wai at the material time. Further, Ds’ acts were approved by the members of LWST in the aforesaid meetings. It would not be just and fair to require Ds to bear personal liabilities in respect of the failure to pay rates in these circumstances.

165.  For these reasons, I would dismiss Ps’ claim against Ds based upon the alleged failure to pay rates.

F7. Validity of the 2017 Resolution

166.  Regarding the 2017 Resolution, Ps are relying upon the matters pleaded in [46] of the Re-Amended Statement of Claim to challenge the validity of this resolution. With respect, I am of the view that Ps’ challenge cannot succeed.

(1) For the reasons set out in [163(1)], P1 and P2’ challenge against the validity of the 2017 Resolution cannot be allowed.

(2) Reading [46] of the Re-Amended Statement of Claim fairly, I do not think that P1 and P2 have raised the point that the 2017 Resolution can only be passed by unanimous consent of all the members of LWST. It has not been made clear by them whether the resolution can be passed by a majority of LWST in [46] or in anywhere of the Re-Amended Statement of Claim. For the reasons set out in [163(2)], Ps cannot be allowed to run the argument that the 2017 Resolution can only be passed by unanimous consent of LWST members.

(3) It is pleaded in [46(3)] of the Re-Amended Statement of Claim that the 2017 Resolution was not signed by a majority of members of LWST. However, as shown in the minutes produced by Ds[53], the May 2017 Meeting was attended by 13 members of LWST. Save and except P4, all the other 12 members signed on the minutes indicating their agreement to the 2017 Resolution. Hence, the 2017 Resolution was agreed by the majority of the members present in the May 2017 Meeting. If P1 and P2 are putting forward a positive case that the 2017 Resolution has not been agreed to by the absolute majority of the members of LWST, P1 and P2 have not shown by evidence that apart from Ps, there is any other member of LWST who is in disagreement with the 2017 Resolution.

167.  I am aware that matters concerning Lot 415 and the matters concerning the Ding Payments are not matters of LWST. However, in their pleaded case, Ps have not said that the ambit of the 2017 Resolution would not cover the legal costs incurred by D1 in respect of these matters. Accordingly, it would not be necessary for me to rule whether the 2017 Resolution would cover matters concerning Lot 415 and matters concerning the Ding Payments.

F8. Limitation Issue

168.  For the reasons above, I am not with Ps and would dismiss Ps’ claims. It would not be necessary for me to consider the limitation issue raised by Ds.

F9. Answers to the Agreed Issues

169.  Based upon the analysis set out in the above, my answers to the Agreed Issues are as follows:

(1) D1 is the helper of the 5 Fongs in the way as pleaded by D1 in his Re-Amended Defence. The duties of the helper do not include taking care of Lot 415. In any event, there is no basis pleaded by Ps upon which the Obligations of the Agent/Trustee/Helper as contended by Ps can be said as legally enforceable obligations.

(2) Following (1) above, the Unlawful Occupation Event cannot be said as being caused by the breach of duties by D1. In any event, there is no basis pleaded by Ps upon which the Obligations of the Agent/Trustee/Helper as contended by Ps can be said as legally enforceable obligations.

(3) Since there is no basis pleaded by Ps upon which Ps may say that the Obligations of the Agent/Trustee/Helper as contended by Ps are legally enforceable obligations, P1 and/or P2 cannot pursue their claim for the Ding Payments by relying upon the said obligations.

(4) Based upon Ps’ pleaded case and Ps’ evidence, there is no material facts upon which the court may exercise the discretion in favour of P1 and P2 to order the disclosure sought by them.

(5) Ps have not pleaded, and Ps have not proved that the Alleged Letting Out at Undervalue has caused loss to LWST. Accordingly, the claim based upon the Alleged Letting Out at Undervalue must be dismissed.

(6) The challenges against the validity of the Rates Resolutions are dismissed. Ds are not liable to Ps in respect of the “Failure to Pay Rates” issue.

(7) The challenges against the validity of the 2017 Resolution are dismissed.

(8) As a result of the above, Ps’ claims would be dismissed.

(9) It would not be necessary for the court to resolve the limitation issue.

G. DISPOSITION

170.  I dismiss Ps’ claims.

171.  Costs should follow the event. There be a costs order nisi that subject to the matter set out in [5] above, costs of these proceedings (including costs reserved), be paid by Ps to Ds, with a certificate for two counsel, to be taxed if not agreed.

172.  Although I am unable to accept Ps’ case, I have to acknowledge that Mr Chau has rendered very helpful assistance to this court. Counsel’s assistance is much appreciated.