TANG KAP WING TSO v. TANG LEUK TSO AND OTHERS

CACV 196/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 196 OF 2010

(ON APPEAL FROM HCA NO. 1944 OF 2007)

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BETWEEN

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J U D G M E N T

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Hon Cheung JA:

1.  I agree with the judgment of Yuen JA.

Hon Yuen JA:

2.  This is an appeal from a judgment of Chung J given on 25 June 2010 dismissing with costs the claims of the Tang Kap Wing Tso 鄧甲榮祖 (“KWT”) acting by one of its managers Madam Liu Chuen Mui 廖泉妹 (“Madam Liu”), against the 1^st Defendant the Tang Leuk Tso 鄧畧祖 (“LT”), and the 2^nd Defendant Tang Tim Chue 鄧添柱 (“Tang Jr”) who is Madam Liu’s son and co-manager of KWT.

Tang Leuk Tso鄧畧祖 (“LT”)

3.1  LT is a “clan, family or t’ong” owning land in the New Territories. It acts through managers registered under s.15 New Territories Ordinance Cap. 97.  There was some dispute as to whether LT is a business association or a family organization, but it was not necessary for the judge to decide this issue.       

3.2  LT owned land and rental income from the land was distributed to its members.  In the late 1990's, some of the land was resumed by Government, giving rise to substantial funds to be distributed to its members.

3.3  Membership of LT was by way of shares which were freely transferable.  The issue in this action is the entitlement to 23 shares.  It is not disputed by the parties before us that these 23 shares had been treated as belonging originally to KWT, but that has been disputed by another interested party not before this court.  I shall come back to this later. 

Shares in question

4.1  In LT’s books, 69 shares had originally been held in the name of Tang Chik Fook鄧藉褔(“TCF”).  TCF was a wealthy landowner who had 3 sons, 1 of whom, Tang Kap Wing 鄧甲榮, pre-deceased him.  TCF set up the KWT for his son.

4.2  Of the 69 shares originally held in the name of TCF, it is not disputed by the parties before us that 23 shares were originally treated as belonging to KWT, although we have not seen any LT documents recording that, and (as mentioned earlier) KWT’s entitlement to the 23 shares had been disputed by Tang Sum On 鄧心安 (“Tang Sr”), who was Madam Liu’s former husband and Tang Jr’s father.

Disputes between Tang Jr and Tang Sr

5.1  As will be recounted in detail later, in the 2 decades between 1983 and 2003, there were disputes between Tang Jr and Tang Sr regarding KWT and entitlement to the 23 shares.  These disputes culminated in:

(1)     a Consent Order made in 1983, and

(2)     a Deed of Transfer made in 2003.

5.2  In the 1983 Consent Order, Tang Jr was declared the “sole successor” of KWT, and he and 2 of his sons were declared the only members of KWT.  

5.3  In the 2003 Deed of Transfer, Tang Jr transferred 13 of the 23 shares to Tang Sr and acknowledged that KWT had never been entitled to any other shares in LT. 

LT’s distributions to Tang Sr

6.  The upshot was that after 2003, the managers of LT (Tang Sr being one) accepted Tang Sr’s claims that he was entitled to the 23 shares.  LT records were amended to place the 23 shares under Tang Sr’s name, and funds allocated to the 23 shares were distributed to him.

Madam Liu’s challenge as manager of KWT

7.1  Tang Sr died on 7 November 2005. Probate was granted (after litigation) to members of his 2^nd family (which will be referred to below). 

7.2  After his death Madam Liu, as one of the managers of KWT, challenged Tang Sr’s entitlement to the 23 shares. However, as will be seen below, Madam Liu has chosen not to join Tang Sr’s estate in these proceedings, despite warnings from Chung J of the effect of the non-joinder of Tang Sr’s estate.

7.3  Madam Liu’s case essentially is thatsince she did not sign the 2003 Deed of Transfer made by Tang Jr (her son and co-manager), and since the LT managers had not ascertained whether the transfer had the unanimous consent of all members of KWT, it was not binding on KWT.  She has sought declaratory and injunctive relief, and also distribution to her as manager of KWT of funds allocated or to be allocated to the 23 shares.  As a result of her challenge, certain funds are being stakeheld by LT’s solicitors.  

Issues

8.1  So, in brief, on the basis that the 23 shares originally belonged to KWT (which basis is common ground to the parties before us), the issues in these proceedings are:

(1)   what was the legal effect (if any) of the dealings between Tang Jr and Tang Sr on the 23 shares owned by KWT?

(2)   did the LT managers exercise due diligence when they made distributions to Tang Sr on the ground that KWT no longer owned the 23 shares?

8.2  I should add that as alternatives to the 23 shares, there are reliefs sought on the bases of 13 shares and 10 shares only.  The reason for this variation in the quantity of shares will appear later.           

Background and context

9.  Before we can determine these issues, it is necessary to set out the background and context in which Tang Jr had dealings with Tang Sr.  In the following summary, I have drawn from facts found in Chung J’s judgment, the judgment of Bruno Chan DJ in FCMC2250/2000 given on 2 September 2002 in divorce proceedings between Tang Sr and Madam Liu, and the judgment of Recorder Yuen SC in HCA3/2006 given on 29 April 2010.  However I have only referred to facts which are material to this appeal.   

Tang Kap Wing Tso 鄧甲榮祖 (“KWT”)

10.1  As mentioned earlier, TKW had pre-deceased his father.  He left a widow Wong Hing Tsun 黄興全 (“Madam Wong”) but no issue.  In his honour his father TCF set up the KWT which held various properties.  The parties before us do not dispute that after TCF’s death, the 23 shares in LT were treated as belonging to KWT. 

10.2  To perpetuate TKW’s line, TCF arranged the posthumous adoption of a son for him.  This took place in the 1930's.

Tang Sum On 鄧心安 (“Tang Sr”)   

11.1  Tang Sr, then a baby, was chosen under this arrangement.  Tang Sr had been born to Tang Kang Cheung 鄧庚祥, who was one of TKW’s brothers but from the age of 2, pursuant to TCF’s arrangement, Tang Sr was sent to live with Madam Wong as her adopted son.

-   1^st family with Madam Liu

11.2  In 1951 Tang Sr entered into an arranged marriage with Madam Liu.  They had 2 children, Tang Jr born in 1952 and a daughter. 

-   2^nd family

11.3  Shortly after the daughter was born in the mid-1950's, Tang Sr began a relationship with a woman who has been referred to as “Madam Y”, with whom he started a 2^nd family.  He had 4 children by Madam Y, 2 sons and 2 daughters. 

-   Relationship between Tang Sr and Madam Liu

11.4  The relationship between Tang Sr and his wife Madam Liu was poor.  Tang Sr did not live with Madam Liu although they did not divorce until 2000, some 45 years after their separation.

Income from KWT

12.1  As mentioned earlier, TCF had set up KWT in honour of his son.  TCF was KWT’s first manager.  After TCF’s death, TKW’s widow Madam Wong took over as manager and Tang Sr received the income from KWT. 

12.2  However after Tang Sr started his 2^nd family, Madam Wong (who lived with Madam Liu) stopped giving him income from KWT.  Tang Sr suspected that Madam Wong had been influenced by Madam Liu, and this caused further hostility between the estranged husband and wife.  Madam Wong also appointed Madam Liu co-manager of KWT in the 1960's.

2 previous sets of litigation

13.  So much for the background of facts against which 2 sets of litigation relevant to the present proceedings were commenced and disposed of.  Both sets of litigation concluded with settlements, as a result of which Tang Jr acquired a status which the LT managers relied on when they acted on his subsequent alienation of shares to Tang Sr, which brought about the present proceedings.   

HCA2125/1978 (“the 1978 Action”)

14.1  The first piece of litigation commenced in 1978.  It would appear that when Tang Kang Cheung (Tang Sr’s natural father) died, Tang Sr conducted certain funeral rites normally conducted only by a son.  Certain elders of the extended Tang family considered this to be inconsistent with Tang Sr’s posthumous adoption as TKW’s son.  These elders took the view that this meant that Tang Sr had renounced the posthumous adoption.

14.2  By a Chinese document dated 8 March 1977, thoseelders sought to remove Tang Sr as “the successor of [KWT]” (see Recorder Yuen’s judgment, para. 5).

14.3  This caused Tang Sr to issue proceedings in the 1978 Action.  There were 7 defendants in the action.  They were:

-   Madam Wong as the 1^st Defendant,

-   Madam Liu as the 2^nd Defendant,

-   Tang Jr as the 3^rd Defendant,

-   the Attorney General as the 4^th Defendant,

-   the 3 children of Tang Jr (2 sons and a daughter, with Tang Jr’s then wife Madam De Guzman as guardian ad litem and next friend) as the 5^th Defendants, and

-   the 2 sons of Tang Sr’s 2^nd family as the 6^th and 7^th Defendants.

14.4  The first 3 defendants in the 1978 Action were the managers of KWT.  Madam Wong and Madam Liu had been the registered managers of KWT since the 1960's.  In 1971 Tang Jr went overseas for university education, but in 1978 he became a registered manager of KWT, and returned to live in Hong Kong in 1980.

14.5  The 5^th, 6^th and 7^th defendants were possible claimants to KWT. 

14.6  At the proceedings, Madam Wong and Tang Jr were represented by counsel, and Tang Jr’s children (who were minors) were separately represented by counsel.     

14.7  Although the pleadings in the 1978 Action were not available to us, it would appear that Tang Sr sought a declaration (presumably in response to the Chinese document made by the elders) that he was the “successor of KWT”.  

14.8  Eventually the parties arrived at a compromise and on 4 May 1983, a summons for a consent order was filed. 

14.9  As minors were involved, the Court’s approval and sanction had to be sought. After a hearing on 8 July 1983, Liu J gave the Court’s approval and sanction after having considered an opinion of counsel acting for Tang Jr’s children, and a Consent Order was made.

1983 Consent Order

15.1  It was ordered by consent that Tang Sr’s claim would be dismissed on certain conditions, including the conveyance by KWT’s managers to him of some of KWT’s lots, and their payment to him of 40% of the proceeds of sale of some other lots of KWT.

15.2  A number of declarations were made in the Consent Order.  The material ones are as follows.

(a)   Tang Sr “is not an adopted son” of Tang Kap Wing, deceased “nor a member” of KWT.

(b)   Neither Tang Sr nor his children including those in his 2^nd family (but which term does not include Tang Jr) “are members” of KWT. 

(c)   Neither Tang Sr nor his children including those in his 2^nd family (but which term does not include Tang Jr) “has or have or will have” any claim of any nature at any time against the managers of KWT and/or KWT “in respect of [Tang Sr]’s alleged membership of or alleged right to succession in” KWT. 

(d)   Tang Jr “is the sole successor” of KWT.    

(g)   Tang Jr and his 2 sons (but not the daughter) “are and were at all material times members” of KWT.

15.3  It would be noted from the Consent Order that in relation to KWT:

(1)   Tang Sr and his 2^nd family were cut off from either membership or succession;

(2)     Tang Jr was “the sole successor” of KWT;

(3)   Tang Jr and his sons were “members” of KWT; but

(4)   there was no declaration that Madam Wong or Madam Liu or Madam De Guzman (the mother of Tang Jr’s children) were members of KWT.  

15.4  The significance of this Consent Order will appear later in this judgment.

Registration of List of Members in KWT

16.1  It is necessary here to digress a little to discuss the membership of KWT.  After Madam Wong’s death in October 1996, a “report” was made by the surviving managers Madam Liu and Tang Jr in KWT’s List of Members 有份人名單.

16.2  Under the printed rubric “Members of the Tso/Tong as follows” 該祖/堂有份人姓名列下, Tang Jr wrote the following names (in addition to the names of himself and his 2 sons named in the Consent Order):

(1)   Madam Liu

(2)     Dora Tang, his 2^nd wife and

(3)     his youngest son 鄧律明 Tang Lut Ming (“TLM”) born to Tang Jr and his 2^nd wife in 1990, after the Consent Order.

16.3  As mentioned earlier, neither Madam Liu nor Madam De Guzman (Tang Jr’s 1^st wife) - both of whom had taken part in the 1978 Action - had been named as “members” of KWT in the Consent Order. 

16.4  However, I would note that it appears consistent with the terms of the Consent Order that Tang Jr’s son TLM was included as a member of KWT, as Tang Jr’s 2 other sons had been included as members.

17.  Returning to the narrative of material events, it would appear that after the 1983 Consent Order, Tang Sr asserted to the then managers of LT (of which he was one) that he was still entitled to 40% of the 23 shares.  That would amount to about 10 shares, leaving 13 shares in Tang Jr’s camp, which apparently is the source of the alternative relief sought in the present proceedings (although that is not material to this judgment).                 

HCA12547/1999 (“the 1999 Action”)

18.1  Theassertion by Tang Sr led to another action, commenced this time by Tang Jr.  There were 3 defendants in this action.  They were:

-   Tang Sr as the 1^st Defendant;

-   Tang Yue Chung as the 2^nd Defendant; and

-   Tang Chiu Kou as the 3^rd Defendant.

All 3 defendants were the registered managers of LT.

18.2  In Tang Jr’s statement of claim, he pleaded

-   at para. 6(ii), the declaration in the Consent Order that he “is the sole successor of [KWT]”;

-   at para. 6(iv), that he “is and was at all material times since his appointment, a manager of [KWT]”; and

-   at para. 10, that “as a successor to [KWT], [Tang Jr] is therefore entitled to receive 23 shares from [LT]”. 

(Emphasis added).

18.3  Tang Sr was separately represented from the other 2 managers of LT.  In his Defence, he denied that KWT had ever been entitled to the 23 shares at all.  He pleaded that TCF had given him the 23 shares personally, but that he (Tang Sr) had subsequently made a gift of 13 shares to Tang Jr, leaving 10 shares for himself.

18.4  In the other LT managers’ Defence, they pleaded that they had no knowledge of the 1983 Consent Order but pleaded that since 1984, Tang Jr had received distributions attributable to 13 shares only, and not 23 shares, without protest.

18.5  In Tang Jr’s Reply, he pleaded that he “is entitled to 23 shares of [KLT] as the successor to [KWT] ...” (Emphasis added).  

2002 Chinese Agreement

19.1  The 1999 Action did not proceed to trial.  On 4 December 2002, Tang Jr and Tang Sr signed an agreement written in Chinese and witnessed by Tang Yue Chung, one of the other managers of LT (who has since died).

19.2  In this document which bore the title of the 1999 Action, it was recited that Tang Jr and Tang Sr had issues regarding LT shares, and that they had arrived at an agreement on the following conditions.

19.3  In Condition (1), it was agreed that Tang Jr would sell 13 LT shares together with the disputed 10 LT shares to Tang Sr for $800,000.

19.4  In Condition (2), it was agreed that after completion of the sale and purchase, Tang Jr 及其子孫 (“and his sons and grandsons”) absolutely could not pursue any interests in LT, whether past or future, and that all benefits of LT would be dealt with by Tang Sr.

19.5  In Condition (3), it was agreed that both parties would instruct solicitors to deal with all procedures.  There were some other conditions relating to the costs of the 1999Action. 

The 2003 Deed

20.1  This was followed by a Deed signed on 21 January 2003 between Tang Jr and Tang Sr. This Deed was drafted by solicitors and both men were separately represented. 

20.2  It was recited (A) that Tang Jr and Tang Sr were in dispute as to Tang Jr’s entitlement in LT, “full particulars of which are set out in the pleadings in [the 1999 Action]” and (B) that Tang Jr had agreed to “abandon his claims against Tang Sr and the other 2 managers of LT” and that he had “agreed to transfer his 13 shares of LT now standing in his names in the books of LT to [Tang Sr]” on the following terms and conditions.  

20.3  The 2003 Deed provided that in consideration of $800,000 to be paid by Tang Sr to Tang Jr, Tang Jr:

(a)   acknowledged and agreed that he was at all material times entitled to 13 shares of LT “as specified in the Defence of [Tang Sr] in [the 1999 Action]”;

(b)   acknowledged and agreed “in his personal capacity and as the sole successor of [KWT], that [KWT] is not and has never been entitled to any share in LT (other than the 13 shares) ...”;

( c)   waived any claims which “he or [KWT] may have against [Tang Sr] or LT arising out of the matters raised in [the1999 Action]; and

(d)   assigned unto Tang Sr absolutely all his rights, title and interest of and in his 13 shares of LT.

(Emphasis added).

20.4  It is notable that clause 4 of the 2003 Deed provided that it “shall be binding on and shall be for the benefit of each party’s successors and assigns”.   

21.  Pursuant to this settlement, the LT managers treated Tang Sr as the owner of the 23 shares previously regarded as KWT’s and made distributions to him accordingly.

Judge’s findings regarding Madam Liu

22.1  Madam Liu, Tang Jr’s co-manager of KWT, was not a party to the 1999 Action or the 2003 Deed.  Hence at the trial, she claimed it was not binding on her as co-manager of KWT and accordingly not binding on KWT.  

22.2  However Chung J found as a fact that Madam Liu had made a choice to leave matters relating to the 1978 Action (concluding with the 1983 Consent Order) and the 1999 Action (concluding with the 2003 Deed) to Tang Jr, and “was content for Tang Jr to make the decisions for her” (see Judgment, paras. 32-35).  In his judgment, the learned judge set out passages in the transcript of Madam Liu’s evidence under cross-examination in which she made various admissions.  I agree those passages support the judge’s findings of fact and show that Madam Liu had authorized Tang Jr to act on her behalf,or at least had acquiesced in his actions (see Judgment, para. 76).        

Judge’s findings regarding Tang Jr

23.1  At the trial before Chung J, Tang Jr alleged that the 2003 Deed was a device or sham to save Tang Sr, as the LT managers might otherwise have exposed Tang Sr for having misrepresented the position relating to ownership of the shares. Tang Jr alleged that he and Tang Sr knew that since the 2003 Deed was not signed by his co-manager Madam Liu, it would not be binding on KWT. Putting it colloquially, Tang Jr’s case was that the 2003 Deed was not worth the paper it was written on.

23.2  Chung J rejected Tang Jr’s allegations for the reasons set out in his judgment (see Judgment, paras. 39-42).  The learned judge’s findings of fact were grounded in the evidence and his reasoning was cogent. There is no basis for this court to interfere with his findings.

Tang Jr’s relationship with Madam Liu

24.1  The judge found in effect that Madam Liu and Tang were “in the same camp” even though Madam Liu was the plaintiff and Tang Jr was a defendant.  In fact Tang Jr was originally a co-plaintiff.  He was removed as a co-plaintiff in 2008 and added as a co-defendant in 2009. 

24.2  Notwithstanding the fact that on Madam Liu’s case, KWT’s interests had been jeopardized by Tang Jr’s transfer of the 23 shares at an undervalue, she acting on behalf of KWT did not seek any damages against him. 

24.3  The judge also noted that Tang Jr was assisting Madam Liu’s counsel at the hearing (see Judgment para. 38). 

24.4  In light of these considerations, the judge was entitled to take the view that they were throughout acting in concert with each other.          

25.  As mentioned earlier, the learned judge found as a fact that Madam Liu had given Tang Jr a free hand to deal with the 23 shares.  She was aware of his settlement with Tang Sr, or “at the very least was content to allow Tang Jr to determine what he considered to be appropriate” (see Judgment para. 52). As the two of them were the managers of KWT, the learned judge held that the Deed was binding on KWT. 

Appeal

26.1  On appeal, Mr Ronny Wong SC, leading counsel for Madam Liu, argued that the dealings between Tang Jr and Tang Sr were not binding on KWT. 

26.2  On the 1^st issue, i.e. what was the legal effect (if any) of the dealings between Tang Jr and Tang Sr on the 23 shares owned by KWT, Mr Wong argued that since the 23 shares were Tso property, the unanimous consent of all KWT members was required for its alienation.

26.3  On the 2^nd issue, Mr Wong argued that since the LT managers knew that KWT was a Tso, the LT managers had failed to exercise due diligence when they accepted Tang Jr’s purported transfer without having made proper enquiries whether the rest of KWT’s members had consented to the alienation. 

26.4  Mr Wong argued that the LT managers could not simply rely on Tang Jr’s status as “sole successor” of KWT (see para. 6 of LT’s Defence), because that status was simply for the purposes of succession to the male line, and it was not succession but membership of a Tso which gave entitlement to Tso property.  Although the LT managers had been given the 1983 Consent Order and the 2003 Deed to support Tang Sr’s claim to the 23 shares, they should have noted that under the 1983 Consent Order, Tang Jr’s 2 sons were declared members of KWT. Accordingly (so Mr Wong argued), the LT managers must have been aware that there were at least 2 other members of the Tso who were entitled to the shares whose consent was required.

Discussion

“Sole successor”

27.1  I shall deal with the last argument first.  Mr Wong’s argument that succession, under Chinese law, means succession to the male line and is not intended to be concerned with inheritance derives support from the decision of this court (Woo, Cheung and Yeung JJA) in Liu Ying Lan v Liu Tung Yiu & Another [2003] 3 HKLRD 249, para. 18.  Whilst that paragraph was concerned with Qing law, rather than Chinese Customary Law, I am prepared for present purposes to accept that there was no difference between the two.

27.2  Accordingly, Mr Wong argued, when Tang Jr claimed in the 1999 Action that he was entitled to the 23 shares because he was the “sole successor” of KWT (see paras. 18.2 and 18.5 above), that had no justification in law.  Insofar as Tang Jr  also relied on his being “sole successor” when he signed the 2003 Deed, the same argument would apply. 

27.3  In light of Liu Ying Lan, I would accept Mr Wong’s argument that when LT’s managers relied in their Defence (para. 6) on the fact that Tang Jr was “sole successor” of KWT, that reliance was misplaced as a matter of law. 

27.4  Having said that, I note that Madam Liu’s Reply did not specifically plead the point that Mr Wong has now taken.  In fact it compounded the confusion between succession and membership when she pleaded that “[Tang Jr] was no longer the ‘sole successor’ as such in or about 2003 since there were additional members in [KWT] registered under section 15 of the New Territories Ordinance, Cap. 97 since 1996" (see para. 13 Amended Reply).

Consent of all members of KWT and necessity needed?

28.1  I shall come now to Mr Wong’s argument that Tso property (even shares) can only be alienated in a situation of necessity, and even then the unanimous consent of all members of the Tso is required. 

28.2  Mr Wong referred to Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat [1987] HKLR 516, where Tang Dep. J (as he then was) recited Mills-Owens J’s definition of a Tso in Tang Kai Chung and Another v Tang Chik Shang and Others [1970] HKLR 276 as “an ancient Chinese institution of landholding whereby land derived from a common ancestor is enjoyed by his male descendants for the time being living for their lifetimes and so on from generation to generation indefinitely” (p.522), and accepted evidence from eminent experts that Tso property may consist of moveable assets as well as land (p.527). 

28.3  Mr Wong also relied on a passage in Kan v Kan at pp534-5 in which Tang Dep J recited the summary of the ratio decidendi of a case in the Supreme Court in Nanking,nearly a century ago now, applying Chinese Customary Law, and found that “as a general rule, alienation [of Tso property] must be because of necessity and that unanimous consent of the members of the clan must be obtained though this general rule is subject to local custom being different”.          

28.4  Accordingly Mr Wong argued that the unanimous consent of all members of KWT was required before the 23 shares could be validly alienated and there was no evidence that there had been such consent.  Nor was there evidence of necessity. 

29.  Before considering these arguments, I would note that the definition of Tso in Tang v Tangstipulates that a Tso’s membership is confined to male descendants.  This was confirmed by para. 7(b) of Madam Liu’s Amended Reply and was accepted by Mr Wong who has advanced his argument based on Tang v Tang.  It must follow that Madam Liu and Madam Dora Tang are precluded from being members of KWT, irrespective of what Tang Jr had written in the List of Members (see para. 16.2 above).  Only Tang Jr and his 3 sons (2 by his Madam De Guzman and 1 by Madam Dora Tang) could be members of KWT.

30.1  And with respect to Mr Wong, I do not agree with his argument that there could be no valid transfer of the shares without evidence of the unanimous consent of all members of KWT and the need for alienation.  It is clear that the requirement of unanimous consent quoted in Kan v Kan from the judgment of the Supreme Court in Nanjing was only a general rule which was subject to local custom being different.  So what is the custom applicable to Hong Kong?  In Re Lau Wai Chau (2000) 3 HKCFAR 98, the Court of Final Appeal held that “under Chinese law and custom, property endowed in perpetuity for the purpose of ancestral worship may be divided amongst the settlor’s male descendants if they, as the heads of all his fongs, unanimously agree to such a division”.  (Emphasis added). 

30.2  This was followed and applied by this court (Tang VP, Cheung JA and Lam J) in Tang Che Tai and others v Tang On Kwai and others CACV137/2007, unrep. 25 January 2008.  In para. 29 the court held that “Lau Wai Chau is consistent with the view that consent of members could be inferred and would usually be expressed through the respective heads of their fong” - although the court did not have to decide whether the head of a fong could “disregard actual dissent” by members of his fong. 

30.3  In the present case, there is only one fong in KWT and Tang Jr is the head.  Applying Lau Wai Chau, his agreement to the alienation of the 23 shares (by transfer of the 13 shares and waiver of claims to the 10 disputed shares) is equivalent to the agreement of all KWT’s members, i.e. himself and his 3 sons. 

30.4  In any event, no “actual dissent” by any of his sons was pleaded or proved. 

30.5  This inferred agreement of all members is consistent with the declaration in the 2002 Chinese Agreement that after completion of the sale and purchase, Tang Jr 及其子孫 (“and his sons and grandsons”) absolutely could not pursue any interests in LT, whether past or future.  It is also consistent with the 2003 Deed where it was agreed that the Deed was “binding on ... each party’s successors ...” . 

30.6  Thus, I take the view that there was unanimous consent by all members of KWT to the alienation, which consent was inferred from Tang Jr’s conduct. So even if  Madam Liu had not authorized or acquiesced in Tang Jr’s actions as co-manager, she would still be bound by the will of all KWT’s members.  Mr Wong did not seek to argue to the contrary.

31.  As for the requirement of necessity, this was never pleaded by Madam Liu as a requirement precedent to alienation of KWT’s property.  In any event the Court of Final Appeal did not hold in Lau Wai Chau that there was such a requirement.                                                

Duty of LT managers to inquire into affairs of KWT?

32.1  That is sufficient to dispose of the appeal.  However as a matter of completeness I would also express my views on Mr Wong’s argument that it was the duty of LT’s managers to enquire whether all the members of KWT had unanimously consented to Tang Jr’salienation of the 23 shares. 

32.2  Mr Wong may be correct when he argued that since the shares are not land, s.15 NTO (and the power it gives registered managers in dealings with land) does not apply literally.  However in my view, it cannot be Madam Liu’s case that a Tso’s managers have no role to play at all in moveable property, because if that were the case, then she has no locus to sue in these proceedings at all.  So it must be Madam Liu’s case that a registered manager does represent the Tso in dealings with moveable property as well.

32.3  In the present case, Chung J has found as a fact that Madam Liu had given her co-manager Tang Jr authority to dispose of the 23 shares, or at least had acquiesced in his actions (thereby feeding the title).  Accordingly both co-managers had agreed to an alienation of the Tso property, and one of them was the head of the only fong in the Tso as well.  Mr Wong has not referred us to any authorities holding that a third party to the Tso (such as the LT managers)was under a duty to pry into the Tso’s internal affairs and demand evidence of the unanimous consent of allthemembers of KWT before acting on the managers’ representations.  In the circumstances I do not see how the LT managers could be said to have failed to exercise due diligence when they proceeded to make distributions in accordance with the 2003 Deed.   

Non-joinder of Tang Sr’s estate

33.1  Finally there is Chung J’s holding that by reason of Madam Liu’s deliberate non-joinder of Tang Sr’s estate, he would in any event have declined to exercise his discretion to grant the declarations and injunctions sought. 

33.2  Mr Wong sought to alleviate the difficulties posed by the non-joinder of this obviously interested party by suggesting that this court’s order could be suspended for a period of time pending notification of Tang Sr’s estate, and if no action is taken by the executors of that estate within that period, the order could then take effect.

33.3  With respect,I do not think that suggestion is consistent with the proper and efficient disposal of justice under the new regime of civil litigation introduced by the Civil Justice Reform.  I do not see any reason to interfere with the judge’s exercise of his discretion to decline the grant of equitable remedies sought by the plaintiff Madam Liu, in the face of her deliberate refusal to join a party which had the most to lose from her claim, i.e. the termination of future distributions to Tang Sr’s estate from LT.      

Order

34.  For the reasons set out above I would dismiss the appeal with an order nisi that the Appellant is to pay the costs of the 1^st Respondent and no order be made as to the costs of the 2^nd Respondent.

Hon Kwan JA:

35.  I agree with the judgment of Yuen JA.