CHAN KONG v. CHAN LI CHAI MEDICAL FACTORY (HONG KONG) LTD AND OTHERS

CACV 161/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 161 OF 2006

(ON APPEAL FROM HIGH COURT ACTION NO. 4101 OF 2001)

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REASONS FOR DECISION

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Hon. Yuen JA:

1.  On 14 September 2007 this court was convened to hear the Plaintiff’s appeal from a decision of Deputy Judge Saunders (now Saunders J) striking out the Plaintiff’s claim against the 1^st, 4^th - 6^th, 10^th, 11^th, 16^th - 18^th, 20^th - 24^th, 26^th, 27^th and 30^th Defendants.  (The other Defendants did not make any applications to strike out).

2.  At the conclusion of the hearing, we decided to adjourn the hearing of the appeal to enable the Plaintiff to formulate a draft Re-Re-Amended Statement of Claim for our consideration.  The order we made was as follows:

(1)	the hearing of the appeal be adjourned;
(2)	on the Plaintiff’s undertaking to apply for Legal Aid within 7 days after these Reasons for Decision are handed down, the Plaintiff’s summons for leave to amend (annexing a draft Re-Re-Amended Statement of Claim) to be filed within 2 months from the grant or first refusal of legal aid;
(3)	should the Plaintiff fail to comply with (2), all parties to the appeal to have liberty to restore the appeal;
(4)	costs of this hearing to be reserved.

3.  These are my reasons for that decision.

Representation

4.  At the hearing before the judge, the Plaintiff had been represented by counsel who had drafted the Re-Amended Statement of Claim.  The Plaintiff was then legally aided.  Since the strike-out however, legal aid has been withdrawn and the Plaintiff has not been legally represented.

Procedural background

5.  The judge had struck out the claim under O.18 rule 19(1)(a), i.e. on the basis that the Re-Amended Statement of Claim disclosed no reasonable cause of action (para. 7 of the judgment).

6.  On 3 May 2006 the Plaintiff lodged a Notice of Appeal.  It was amended on 21 November 2006. 

Plaintiff’s Summons to include documents

7.  On 25 April 2007 the Plaintiff issued a summons for leave to include certain documents in the Appeal Bundle. 

8.  Since the judge had determined the application for strike-out on the ground that the statement of claim did not disclose a reasonable cause of action, no evidence was admissible whether from the applicant or from the respondent (para. 18/19/3(4), Hong Kong Civil Procedure 2007 vol. 1 p.332).  That applies similarly on appeal.  Accordingly we did not consider the new documents.

Judgment

9.  The Plaintiff’s claim was made on the basis that he was a member of one or two tongs (the Chan Him Muk Tong and the Li King Sun Tong), or a partnership comprising members of the two tongs (the Chan Li Chai partnership) which held two properties on Hong Kong Island and carried on a business in Hong Kong. 

10.  The judge held that the claim was doomed to fail as Hong Kong law does not recognize tongs other than for the holding of land in the New Territories.   

11.  The Plaintiff’s counsel had sought to argue that notwithstanding the use in the Re-Amended Statement of Claim of the word tong, what was meant was not a tong as conventionally understood but something different.  However on analysis the judge held that the characteristics asserted in the Re-Amended Statement of Claim were those of a  tong as conventionally understood. 

12.  As for the Plaintiff’s claim to be a member of the partnership, the judge held that as the Plaintiff‘s case involved an assertion that he had automatically become a “partner” by birth without having entered into any contractual arrangement, that was not a partnership known to Hong Kong law.  It is to be noted that the Re-Amended Statement of Claim did not plead any rights under the Chinese Partnerships Ordinance, No.53 of 1911.

Grounds of Appeal

13.  From what I can understand from the amended notice of appeal and the Plaintiff’s skeleton submission (which was written primarily in Chinese), his main points on appeal are that:

(1)	the judge erred in assuming that the tongs in the present case were tongs in the traditional tso’ tong sense; he says the tongs here were business organizations;
(2)	the judge failed to consider that the Plaintiff had been enjoying rights in the two properties and the partnership until the alleged breaches of trust in 1975;
(3)	the judge failed to take into account the fact that the “orders” in HCMP2839/1995 and CACV1115/2000 confirmed his rights;
(4)	the judge failed to accept that the rule against perpetuities and inalienability apply to immoveable property only and therefore does not apply to the claim under the partnership;
(5)	the judge failed to apply foreign customary law;
(6)	the judge erred in the exercise of his discretion in refusing to give the Plaintiff an opportunity to further amend his claim.

14.  At this stage of the appeal, both parties not having as yet advanced oral submissions, it would be inappropriate to discuss any of the other points raised above.  What has led to our decision to adjourn the appeal to permit the Plaintiff to re-draft his claim was the introduction of the Chinese Partnerships Ordinance into his case.

Stamp Appeal

15.  The matter arose in this way.  One of the authorities provided by the Plaintiff was the judgment in a stamp appeal (CACV1115/2000).  The appellant was the 1^st Defendant, and the respondent was of course the Collector of Stamp Revenue.  It was heard by this court (Rogers V-P, Keith JA and Le Pichon JA) in June 2001.

16.  In a judgment handed down on 5 July 2001, the Vice-President referred to a number of matters set out in the case stated.  It was said that Chan Li Chai was a partnership of two Chinese family tongs, the Chan family tong and the Li family tong (para. 4); that in 1952 Chan Li Chai was registered as an unincorporated firm under the Business Registration Ordinance with members of the Chan family tong and the Li family tong named as its partners (para. 8); and more importantly in the present context, the following passage (para. 13):

“

Up until 1972 the Chinese Partnerships Ordinance was in force.  That allowed family tongs to be registered as partners in a registered partnership.  Under section 4(2) of that Ordinance, if a tong was to be registered as a partner only one member of the tong would be registered as a representative of the tong.  When the Chinese Partnerships Ordinance was repealed by 1971 legislation the position of the Chan Li Chai partnership obviously came into question”.

Chinese Partnerships Ordinance 1911-1971

17.  According to the editors of Halsbury’s Laws of Hong Kong vol. 6(1) 2005 Reissue Companies and Corporations (para. 95.0004), the Chinese Partnerships Ordinance Ord. No. 53 of 1911 came into being because Chinese merchants in Hong Kong considered the English law of partnerships to be unduly harsh, in that it made a partner liable for all the debts of the firm, however small his interest in the firm. 

18.  The English law had apparently been criticised in a judgment in 1908 for failing to consider local customs.  In 1911 the Chinese Partnerships Ordinance was passed which provided for the registration of Chinese partnerships and which enabled partners therein to register and thereby limit their liability.  The Ordinance was in force for 60 years until it was repealed in 1971.    

19.  The relevance of the Chinese Partnerships Ordinance to the present appeal appears in s.2 and s.4.  Section 2 provides, where material:

“	‘Registered Partner’ shall mean any partner including a firm, a family tong or a body corporate who or which is registered as such under this Ordinance” (Emphasis added).

Section 4 provides, where material:

“	(1)	No partnership may register under this Ordinance unless one at least of its partners registers as a partner therein.
	(2)	... family tongs may be registered as partners in a registered partnership, provided that a ... family tong so registered shall be regarded, so far as the partnership in which it is registered is concerned, as one person, and provided also that ... one member only of the tong shall be registered as a representative of the ... tong so registering aforesaid, and provided also that no person may be registered as a representative of a ... tong unless the Registrar of Companies is satisfied that he has the authority of ... the adult members of his tong to be registered as their representative in the registered partnership, and unless one month shall have elapsed since an announcement of his intention to apply for registration as a representative of the ... tong in question shall have been published in the Gazette and in two Chinese daily newspapers circulating in the Colony.
	(3)	The Registrar of Companies shall register the names of all members of a family tong, disclosed to him by such representative, including infants of any age; and thereafter members so registered shall have their liability limited in the same manner as if they were registered as partners under this Ordinance”.  (Emphasis added).

20.  Presumably the Plaintiff will submit that the Ordinance indicates that even if (contrary to his primary case) generally the rule against perpetuities applies to personal property as well as real property (as the judge held in para.30), the legislature of Hong Kong recognized in the Ordinance that family tongs (including infants of any age) were capable in law of holding shares in a firm. 

21.  It may be a matter for future debate whether this was an exemption to the general law which applied only to family tongs which have registered under the Chinese Partnerships Ordinance, or whether the Ordinance was simply an application of the broader prevailing law, with the requirements for registration and notice being mere administrative safeguards. 

Registration under the Chinese Partnerships Ordinance? 

22.  The Plaintiff has asserted before us that the Chan Li Chai partnership was registered under the Chinese Partnerships Ordinance from the 1920's to 1952 with the two tongs as partners.  If that is proved, that may lead to a position where he has on birth (in 1949) acquired rights to the partnership, which provided the funds for the purchase of the two properties.

23.  Having said that, it should be noted that the Vice-President’s judgment in CACV1115/2000 did not refer categorically to the fact that the Chan Li Chai partnership had been registered under the Chinese Partnerships Ordinance.  It referred to registration in 1952 under the Business Registration Ordinance, but presumably that is not equivalent to registration under the Chinese Partnerships Ordinance.   

24.  It would also be pertinent to note that the Hong Kong Hansard for the Session 1971/72 records the Attorney General (Mr Roberts, as he then was) when moving the Law Revision (Miscellaneous Amendments) Bill 1971 to repeal the Chinese Partnerships Ordinance as saying (p.248):

“

Sir, the main purpose of this bill is to repeal 3 obsolete Ordinances.  The first of these is the Chinese Partnerships Ordinance, which was enacted about 60 years ago.  This form of partnership differs from those which are registered under the Limited Partnerships Ordinance or under the Partnerships Ordinance in that the liability of a registered partner in a Chinese partnership is limited to the same proportion of the partnership debts as his interest in the registered partnership bears to the total interest of all partners.

Only one such partnership appears to have been registered in the last 35 years and none is still in existence.  In view of the fact that the Limited Partnerships Ordinance provides an adequate framework for those who want to form a body of this nature, it is considered that the Chinese Partnerships Ordinance can safely be repealed”.  (Emphasis added).

Pleadings

25.  The Plaintiff has alleged that he is a member of a tong which was a partner in a Chinese partnership.  It is clear that he has not pleaded the Chinese Partnerships Ordinance or the impact of that Ordinance on his claim.  He says that may have been due to the fault of his former legal representatives.  Be that as it may, it is clear that he needs to further amend the Re-Amended Statement of Claim, hence the order we made which has been set out in para. 2.

Hon. Waung J:

26.  I agree.