LOK TIN CHOI v. LAI KWAI LIN

HCMP 315/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 315 OF 2012

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J U D G M E N T

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Introduction

1.  These unfortunate proceedings, which raise issues of Chinese customary inheritance law, pit a son against his mother and two of his five sisters in respect of an estate that is not insignificant. 

2.  The defendant, (Madam Lai), is the mother of the plaintiff (Mr Lok).  Madam Lai is registered on the title to the whole of four lots of land, and as to a one third share in three lots of land, as trustee for Mr Lok.  By originating summons, Mr Lok seeks a vesting order in respect of the seven lots of land, and consequential orders.  

3.  For convenience I will refer to Lots 2437 and Section B of Lot No 2434 in Demarcation District No 111 as the 104 house and the 107 house respectively.  Lots 1908 and 1811 will be dealt with together. Those four lots are owned as to the whole.  As will be seen, lots 1908 and 1811 have been resumed by the Government and a sum of compensation in excess of $8.5 million awaits payment. I shall refer to Lots Nos 2394, 2402 and 2415 in Demarcation District No 111, in which the interest is as to one third, as the one third share lots. 

4.  By a counterclaim, Madam Lai says that on 8 November 2010, a family agreement was reached between her and Mr Lok and that pursuant to that family agreement the following distribution of the compensation fund should be made:

(i) a sum of $4,050,000 be paid by cheque, drawn in favour of Mr Lok and Madam Lai in their joint names for the purpose of rebuilding the 104 and 107 houses occupied by Mr Lok and Madam Lai, with the intention that the two houses will be used by Mr Lok and Madam Lai respectively for life;

(ii) $1 million will be given to Mr Lok absolutely;

(iii) $3,500,000 will be given to Madam Lai absolutely as her maintenance for life.

5.  In the alternative, Madam Lai seeks a declaration that by reason of Chinese law and custom she continues to be the trustee of the seven lots of land, and an entitlement to maintenance for life from Mr Lok.  She also seeks orders that maintenance and dowries (if applicable) be made available to two unmarried daughters who are living with Madam Lai.  Madam Lai says that by reason of applicable Chinese law and custom the sum of compensation should be distributed between members of the family.

The family circumstances

6.  The factual circumstances giving rise to this unfortunate litigation arose in the following way. 

7.  Mr Lok is the only son of the late Mr Lok Sang, also known as Lok Sang Tseung, (Mr Lok Sang), and his wife, Madam Lai.  Mr Lok Sang sadly died of cancer in March 1984, at the premature age of 35, shortly before Mr Lok turned 13.  Mr Lok, now aged 42, was the 2^nd child of the marriage.  There is one elder sister and four younger sisters.  Three of the sisters are married.  The remaining two reside with Madam Lai. 

8.  Mr Lok Sang’s estate comprised, first, two New Territories houses, close to each other in Pat Heung.  The 107 house is at 107 Wang Toi Shan Tsuen, Fan Kam Rd, Pat Heung, and is the family home.  It was built some 40 years ago and comprises an area that was used by the Mr Lok Sang and Madam Lai as a local store in the village.  The 107 house is now occupied by Madam Lai and two of her daughters.  The 104 house is at 104 Wang Toi Shan Tsuen, Fan Kam Rd, Pat Heung, and is adjacent to the 107 house, but not exactly contiguous to it.  That house is much smaller and is now occupied by Mr Lok, his second wife, and their twin daughters.  Mr Lok had previously been married, but is divorced.  There was one son from that relationship who has since a young age been cared for by Madam Lai.  He is now 18 and is presently in education in the United Kingdom, that education apparently being paid for by his mother.  There was a paucity of detail as to his circumstances. 

9.  In addition, together with his two brothers, Mr Lok Sang owned a one third share in four other parcels of land.  His estate also comprised the shop business in the 107 house and no doubt various chattels.  At some time, (the evidence was not complete), it appears that in addition to the store Mr Lok Sang and Madam Lai made the store premises available for local people to play mahjong, which provided a further source of income.  There is no evidence that anything else was comprised in the estate.

10.  Mr Lok Sang died intestate.  By s 11 Intestates’ Estates Ordinance, Cap 73 (“IEO”), Chinese custom and customary rights were preserved in relation to New Territories land.  Other than the land, the remainder of the late Mr Lok’s estate fell to be distributed pursuant to the IEO.  It appears that without any formal steps being taken, the business passed to Madam Lai, together with the chattels.

11.  Madam Lai continued to operate the business from which she supported the family and brought up the 6 children.  She still operates the store, but said that now it gave her very little income.  It appears that the mahjong business ceased quite some time ago. 

12.  Lots 1805 and 1811 were let for rural purposes and a very modest rental was received by Madam Lai between 1994 and 2009, which she used to supplement her income to support the family. The 104 house was used as a storage area for the grocery store until the year 2000, when it was renovated to become a dwelling.  It was then rented out at $2,200 per month until Mr Lok and his current family moved to live in it in 2006.  There is no suggestion that any of the other property had any income.  There was a small shed, without electricity or water, that had been let to a friend of Mr Lok Sang, and continued to be let for roughly 5 years after his death.  It is said that the rent was $60 per month, and that no income has been generated from it since.  It is not clear where that shed is located.

The devolution of the land:

13.  There is no dispute between the parties that at the date of the death of Mr Lok Sang, all of the land he owned was in the New Territories, and was subject to the provisions of s 17 of the New Territories Ordinance, Cap 97, (“NTO”) (now repealed).  By that provision, unless a grant of probate or letters of administration of an estate were obtained within 3 months of the death, the Land Officer, on ascertaining the name of the person who was entitled to such land in succession to the deceased person would register the name of the successor in the Land Registry. 

14.  It is equally not disputed between the parties that pursuant to s 13 NTO, the Land Officer would apply Chinese custom and customary rights in order to determine the successor to the land.  The parties, and their experts, agree that pursuant to Chinese customary inheritance law an interest in land will pass down the male line, and that consequently Mr Lok, as the only son, was solely entitled to succeed to Mr Lok Sang’s title to the land.

15.  At the time of his father’s death Mr Lok was 12 years old and consequently a minor. Pursuant to s 18 NTO, title to the various parcels of land was registered in the name of Madam Lai as trustee for Mr Lok.  The documents produced show that Madam Lai accepted the trusteeship.  The concept of a trust is one that is not known to Chinese customary law but it is clear that although the right to succession of New Territories land was subject to Chinese customary law, the machinery by which an estate would be administered in Hong Kong was Hong Kong law see: Wu Koon Tai & Anor v Wu Yau Loi [1997] AC 179 (PC).  The registration of title in the name of Madam Lai as trustee for Mr Lok was accordingly perfectly proper.

16.  At some stage Madam Lai transferred the one third share in one of the parcels of one third share lots to Mr Lok, and at the same time, Mr Lok’s uncles transferred to him the one third share they each held in that land, giving Mr Lok title to the whole of that piece of land.  Although the evidence was not entirely clear it appears that Mr Lok then sold that parcel of land together with the ding right he held in that respect, it appears, for a sum of HK$380,000.  Mr Lok apparently took that money to the Mainland and invested it in the business. There was little evidence of the circumstances of that business other than that it appears that it did not prosper.  There was no evidence as to the value of the one third share held as a trustee for Mr Lok in the 3 other parcels of land held with Mr Lok’s uncles. 

The dispute arises

17.  Mr Wong, for Madam Lai, correctly acknowledged that in the absence of a new event that occurred in 2010 in respect of Lots 1805 and 1811 it is highly unlikely that this family dispute would ever have arisen. 

18.  Lots 1805 and 1811 in Demarcation District No 111 are rural pieces of land some distance away from the two family homes.  In 2010, these two lots were resumed by the Government for the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link. Compensation in the sum of $8,555,404.80 has been assessed to be paid in respect of that resumption.  That sum is held by the Government, and its distribution awaits only the resolution of these proceedings.

19.  It is the distribution of that sum that is at the heart of these proceedings. 

A vesting order in respect of the remaining parcels of land

20.  Mr Lok seeks a vesting order respect of the 104 house and the 107 house land held by Madam Lai on his behalf as trustee, solely, and in respect of the one third share land held by Madam Lai on his behalf as trustee. 

21.  Although the law is clear that a trust approved by a Land Officer under s 18 NTO automatically determines upon the beneficiary reaching the age of majority, (see per Godfrey J in Re The Trustee Ordinance (Cap 29) [1988] 2 HKLR 17), no steps were taken to put the remaining seven lots of land in Mr Lok’s name.  To this day Madam Lai remains on the title to all parcels of land, as a trustee for Mr Lok.  However, pursuant to s 45 Trustee Ordinance, Cap 29, on the face of it, Mr Lok is entitled to be registered in his own right to the various parcels of land.  In Re the Trustee Ordinance, Godfrey J’s said, in relation to an application for a vesting order by a minor who had subsequently attained his majority:

“I suggested recently (see Trustee Ordinance (Cap 29), re MP No. 2133 of 1987) that it would be a good thing if, in this sort of case, the Land Office resume its former practice in which the land officer deleted reference to the trusteeship on the register on proof of the attainment of the age of majority by the minor and the death of his trustee, instead of compelling the former minor to apply to the court for existing order.”

Although the judge understood that the matter was under consideration as part of a (then) forthcoming revision of the NTO it appears that nothing was done and that person in the situation of Mr Lok is still required by the Land Office to apply for a vesting order.

22.  Mr Wong was quite right to acknowledge that he could not resist a vesting order in respect of Lots 2437 and Section B of Lot No 2434 in Demarcation District No 111, (the 104 and 107 houses) and the three one third interests.  His argument centred upon the cash sum held by the Government and waiting distribution. 

23.  I accordingly order that the 104 house, the 107 house, and the one third share lots each be vested in Mr Lok forthwith. Lots 1805 and 1811 fall into a quite different category.

The consequence of the resumption notice

24.  It is clear from the judgment of Yuen J (as she then was) in Re Liu Chung Chui (unreported, HCMP 3533/2000, 1 September 2000) that the consequence of the resumption notice is that Lots 1805 and 1811 have reverted to the Government and are no longer held by Madam Lai as a trustee or in any capacity.  The resumption notice, issued on 28 January 2010, provides that the various parcels of land referred to in the notice, including Lots 1805 and 1811, “shall be resumed”.  Under s 5 Lands Resumption Ordinance, Cap 124:

“On the expiration of one month, or any longer period authorized under section 4(3), the land other than any land purchased by agreement under section 4A shall –

(a) where it is an undivided share in land, vest in The Financial Secretary Incorporated together with such rights to the use and occupation of any building or part thereof as may be appurtenant to the ownership of that share; and

(b) in all other cases revert to the Government,

and all the rights of the owner, his assigns or representatives and of any other person in or over the land or any part thereof shall absolutely cease.”

25.  The plain consequence of that provision is that any rights that either Mr Lok or Madam Lai had in respect of Lots 1805 and 1811 ceased to exist on 28 February 2010, one month after the issue of the resumption notice.  It is clear, as Yuen J points out, that if the present application for a vesting order had been made to the Court prior to the reversion to Government, an order in terms would have been made.  As the land has now reverted to the Government, a vesting order is no longer appropriate because there is no interest in the land which can be vested in Mr Lok. 

26.  In these circumstances the appropriate declaration to be made is in the following terms:

“That Lok Tin Choi (駱天財) was, immediately prior to the resumption by reversion to Government under the Lands Resumption Ordinance, Cap 124, entitled to all the estate, rights, title, benefit and interest of and in Lots 1805 and 1811 in Demarcation District No. 111 as the sole beneficial owner thereof and is entitled to all the rights of the “former owner” under the provisions of the Lands Resumption Ordinance consequential to such resumption.”

I so order.  The effect of that order is that Madam Lai has no interest whatsoever in Lots 1805 and 1811, and no indemnity need to be sought from her by the Lands Department upon any distribution of compensation monies. 

The family arrangement

27.  Whether any orders can be made in relation to the proceeds of the resumption of the land depends first on whether or not Madam Lai has established a family arrangement. 

28.  Madam Lai’s evidence was that correspondence with the Director of Lands, exhibited by Mr Lok, referred to a family agreement reached on 8 November 2010.  I understand the inference sought to be drawn from that assertion and the correspondence is that there was such an agreement. 

29.  The correspondence in respect of the compensation appears to have begun on 22 April 2010, when the Lands Department wrote to “Lok Tin Choi with Lai Kwai Lin as trustee” concerning the compensation.  A later letter dated 12 July 2010, referred to a datasheet to be completed by Mr Lok but which had not been returned to the Lands Department.  That letter raised a requirement of the Lands Department that both Mr Lok and Madam Lai should join in the execution of an agreement as to compensation and indemnity.  That was an entirely proper request, bearing in mind that the title still showed the land being held by Madam Lai as a trustee for Mr Lok. 

30.  It is not clear whether or not Mr Lok received either letter, although both appear to have been addressed to the 104 house.  His assertion that he had not received any of the correspondence was not challenged in cross-examination.  However, on 6 September 2010 a letter was apparently prepared by or for Mr Lok, addressed to a senior solicitor in the Lands Department, in which Mr Lok said:

“The said Lot was succeeded under the name of my father Mr Lok Sang Tseung. At that time I did not yet have the legal capacity of succession because I had not yet attained the age of 18; therefore my mother (Madam Lai) acted as trustee for the time being. Now, I am already an adult and (I) have sufficient ability and knowledge to deal with my properties and documents. On the contrary, my mother is uneducated and illiterate. In respect of the matter of compensation for resumption of lands, she had never given any document to me for (my) perusal. I have no idea why she is hiding this matter, however I deeply believe that she has lost the duties or qualification as a trustee.” (by translation) (sic)

31.  On 1 December 2010, Mr Lok instructed solicitors in respect of the matter and they requested the Lands Department to supply copies of all relevant documentation. A draft agreement as to compensation and indemnity from both Mr Lok and Madam Lai had been prepared by the Lands Department, but had not been signed.  On 16 February 2011, Mr Lok’s solicitors wrote to the Lands Department stating that Mr Lok requested that all compensation and interest be paid to him directly. 

32.  A further letter from the Lands Department, dated 19 April 2011, contains the following paragraph:

“I have informed Madam Lai Kwai Lin (“Madam Lai”) of your client’s request (that resumption compensation should be paid directly to Mr Lok).  Madam Lai’s solicitors, Messrs Paul W Tse have informed us that Madam Lai objects to your client’s request on the following grounds:-

(a)    Madam Lai is still the trustee holding the Lots which are yet to be vested in your client.  Messrs Paul W Tse is of the view that your client would not be entitled legally to claim for compensation direct unless Madam Lai’s consent is obtained.

(b)   In pursuance of the family agreement reached between the parties, Madam Lai shall receive the compensation on behalf of your client and distribute the same among the family members.  Madam Lai would object to your client’s request which would be in breach of the said family agreement.”

33.  No correspondence prior to that letter was produced which contain any reference to either a family agreement or the terms of such a family agreement.  The existence of the family agreement was put to Mr Lok, he denied that any agreement had been reached, although he acknowledged that there had been a meeting at which a proposal had been put to him, which he had rejected.  His evidence was that the concealment from him of the letters concerning the resumption of the land and the compensation, and the distribution of the compensation fund was a source of disharmony in the family.

34.  Madam Lai’s evidence was that her daughter, Lok Wai Ying (Ms Lok) was present at the meeting.  Ms Lok had not filed an affirmation, and was not called to give evidence, although she was present in court throughout the trial.  The fact that she neither made an affirmation nor was she called was not explained.  Mr Liu submitted that I was entitled to draw an adverse inference in those circumstances.  I accept that when a litigant, without explanation, fails to call as a witness a person who might reasonably be expected to give favourable evidence for the litigant, it is open to inference that that person’s evidence would not have helped the litigant’s case: see Li Sau Keung v Maxcredit Engineering Ltd & Anor [2004] 1 HKC 434, citing with approval Cavendish Funding Ltd v Henry Spencer & Sons Ltd [1998] EG 146 at 148-9. 

35.  The reference to a family agreement in the correspondence with the Lands Department is not sufficient to establish the existence of a family agreement.  The concept of a family agreement on terms that were undoubtedly highly favourable to Madam Lai is quite unlikely, having regard to the concern expressed by Mr Lok of Madam Lai’s position as a trustee, in his letter to the Lands Department on 6 September 2010, and his evidence, not denied, that the distribution of the compensation sum was a source of family disharmony. Madam Lai was vague as to the details of the agreement, said nothing as to the circumstances in which it was made, and there was no evidence supporting her position from Ms Lok who was said to have been present.  Mr Lok’s position that there was no agreement was consistent with the concern he had expressed to the Lands Department as to Madam Lai’s position as a trustee, and consistent with the complete absence of any proper reference to a family agreement in the correspondence. 

36.  I reject the claim that a family agreement had been made and is enforceable. 

Chinese customary inheritance law

37.  I accept Mr Liu’s submission that there are two steps by which the court will apply Chinese customary inheritance law.  First, it must do so pursuant to s 13 NTO in respect of New Territories land.  Second, the customary law to be applied is that which existed in Hong Kong in 1843 except in so far is that custom has been modified by legislation, and except in so far as the customary law would be oppressive. 

38.  Significant legislative changes in 1971, including the IEO, and the Deceased’s Family Maintenance Ordinance Cap 129, substantially modified Chinese customary inheritance law, specifically limiting that law to New Territories land.  Other assets such as cash in the bank, a business, and chattels and appurtenances, after 1971, now fell to be distributed in an intestate estate pursuant to the IEO, and not customary law. 

39.  In the decision of the Court of Appeal in Tang Che Tai & Ors v Tang On Kwai & Ors (unreported, CACV 137/2007, 25 January 2008) Tang JA (as he then was) said this at §11:

“I deal with the counterclaim first. As noted, it is concerned with compensation money paid as a result of compulsory resumption of land. The land before resumption would have been covered by s 13 of the New Territories Ordinance, Cap 97. I adhere to the views expressed in Kan Fat-tat v Kan Yin-tat [1987] HKLR 516 at 524, that such compensation money:

‘… cannot be regarded as land and in so far as the application of Chinese custom or customary right depends on s. 13 of the New Territories Ordinance, such Chinese custom or customary right ceases to apply upon reversion of the land to the Crown.’”

40.  That statement provides a complete answer to Madam Lai’s suggestion that the court should distribute the compensation fund amongst members of the family in order to satisfy Chinese custom or customary rights.  I simply have no jurisdiction to apply Chinese custom or customary rights to a sum of money.  Chinese custom or customary inheritance rights appear now to be limited solely to New Territories land and not to personalty.

Conclusion

41.  Madam Lai’s counterclaim for a declaration that she is entitled to remain a trustee or for the distribution of the compensation fund must fail. 

42.  There will be a declaration that Lok Tin Choi is solely and absolutely entitled the sum of $8,555,404.80 being statutory compensation payable consequent upon the resumption by the Government of the Special Administrative Region of the People’s Republic of China in respect of all those pieces or parcels of land in Yuen Long, New Territories, and registered in the Land Registry as Lot No 1805 and Lot No 1811 both in Demarcation District No 111; together with any interest accrued thereon. 

43.  It is accordingly not necessary for me to decide whether I prefer the evidence of Professor Dicks or Professor Cheng on the issue of the distribution of an estate pursuant to Chinese customary inheritance law.  However I am satisfied from them both that at Chinese customary inheritance law male members of the family, inheriting family property, were under an obligation to provide maintenance for a deceased man’s widow, their mother, and maintenance for unmarried daughters, including dowries, prior to their marriage.  Those obligations are derived from filial piety and family property. 

44.  Although those obligations are not enforceable by law in Hong Kong because they arise from customary law, Hong Kong society is one which rightly places great value on filial piety.  Although the obligation may be unenforceable, it is the norm in our society that children take care of their elderly parents.  Mr Lok has set out in his affidavits a proposal he has which would ensure that both the 104 house and the 107 house are renovated, and that Madam Lai and her two unmarried daughters receive appropriate maintenance.  All that I can do is to express the sincere hope that he will do as he says, and that harmonious relationships are restored to the family.

 Costs

45.  There will be an order nisi that Madam Lai must pay Mr Lok’s costs of proceedings on a party and party basis and, with her own costs being taxed on Legal Aid Regulations.