TANG MAN KIT AND ANOTHER v. HIP HING TIMBER CO LTD

CACV 137/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 137 OF 2002

(ON APPEAL FROM HCA 8000 OF 1990)

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J U D G M E N T

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Hon Cheung JA :

History of the appeal

1. On 3 September 2001, Yuen J (as she then was) set aside the Re-Re-Amended Writ of Summons of the plaintiffs and dismissed their action.

2. The plaintiffs appealed.  The Court of Appeal (Rogers V-P and Le Pichon JA) reversed the decision on 11 December 2002.  The action was ordered to be remitted to the Court of First Instance for trial (“the first judgment”).

3. The defendant then appealed to the Court of Final Appeal.  The Court set aside the first judgment of the Court of Appeal on the ground that it was given without jurisdiction: the judgment of Yuen J was a final judgment and the appeal should be heard by a full bench of the Court of Appeal instead of two judges.  The original appeal was ordered to be reinstated.

4. This Court heard the reinstated appeal.

Nature of the claim

5. The facts of the case are fully set out in the first judgment of this Court and in the judgment of the Court of Final Appeal, I will only refer to the essential facts.

6. The action was first commenced in 1990 to recover land belonging to the Wah Yan Mo Fan Heung (華人模範鄉) (‘the Heung’) which had been occupied by the defendant.  The plaintiffs contended that the land was let to the defendant as a yearly tenant and notice to quit had been served on 10 April 1986 terminating the tenancy on 31 December 1986 but the defendant wrongfully held over possession of the land after expiration of the notice to quit.

The defence

7. The defendant admitted that in 1966 Mr. Wong Tat To, a manager of the Heung agreed to let the land to Mr. Chong Shui Kit (‘Mr. Chong’) for a nominal fee until such time when the Government resumed the land.  It was also agreed by them that in the event of resumption, Mr. Chong would be entitled to receive 60% of the compensation for resumption payable by the Government to the Heung (‘the 1966 agreement’).

8. Mr. Chong was then trading in the name of Hip Hing Timber Company.  In 1974, the defendant was incorporated.  Mr. Wong Tat To and Mr. Chong agreed that the 1966 agreement would continue to apply with the defendant taking over the place of Hip Hing Timber Company (‘the 1974 agreement’).

9. The defendant averred that it and Mr. Chong had incurred expenditure on the land with the result that they acquired an equity in respect of their expenditure on the land.  The defendant sought, among these things, for specific performance of the 1966 agreement and 1974 agreement.

The applications before Yuen J

10. The plaintiffs were not able to litigate their claim because the defendant applied by way of notice of motion (‘the motion’) to set aside the writ on the basis that it was issued without authority.  The motion was said to be issued pursuant to the procedure laid down by the House of Lords in Russian Commercial and Industrial Bank v Comptoir d’Escompte de Mulhouse [1925] AC 112 and followed in Banco de Bilbao v Rey [1938] 2 All ER 253.

11. This application was lodged shortly after two failed attempts by the defendant to stop the action from proceeding in its normal course.  The first was an application taken out in March 1998 to strike out the amended statement of claim and dismiss the action on the ground that the plaintiffs were an unincorporated association and therefore was not a separate legal entity which had the capacity to sue.  The title of the plaintiff was then ‘Wah Yan Mo Fan Heung (華人模範鄉) with Chan Kam Cheung and Tang Man Kit as mangers’.  On the hearing of this application, the plaintiffs obtained leave to amend the title of the action to “Tang Man Kit (suing as sole manager of Wah Yan Mo Fan Heung”.  Mr. Chan Kam Cheung (‘Mr. Chan’) had by that time died.  The statement of claim also included a plea that the Heung was a T’ong within the relevant section of the New Territories Ordinance (“NTO”), Cap. 97 (now section 15 of the current edition of the NTO).

12. After this failed attempt, the defendant then applied for a trial of preliminary issue on the following four issues:

(1)	Was Mr. Tang Man Kit (‘Mr. Tang’) a validly approved and registered manager of the Heung under section 15 of the NTO?
(2)	Was the Heung a T’ong within the meaning of the NTO?
(3)	Whether the plaintiffs had standing to bring the action.
(4)	Whether Mr. Wong Tat To and Mr. Wong Pui were validly approved and registered managers of the Heung under section 15 of the NTO as of 10 April 1986.

13. At the hearing Yuen J was of the view that the question of lack of authority to sue could not be raised as a defence in the action, hence a trial of preliminary issues was not the correct procedure.  She gave the parties liberty to apply.  This resulted in the defendant issuing the motion.

The grounds

14. The motion was later amended by specifying that the plaintiffs’ action was issued without authority on the following grounds:

(1)	the Heung is not a clan, family or T’ong within the meaning of sections 15 and 16 of NTO or exempted from the requirement to be registered under the Companies Ordinance by virtue of section 16 of the NTO;
(2)	the Heung has no legal status and is not recognised in law as a legal entity capable of enforcing rights over the land orauthorising the commencement of an action on its behalf; and
(3)	no application for approval has been made under section 15 of the NTO or approval granted pursuant to any such application or at all.

The decision

15. The issues that Yuen J considered were as follows:

(1)	What is the meaning of ‘T’ong’ in the context of section 15 of the NTO?
(2)	What is the Heung and is it a T’ong within the meaning of section 15?
(3)	Even if the Heung is a T’ong within the meaning of section 15, have Mr. Tang and Foo Tak Ching (‘Mr. Foo’) been appointed managers of the T’ong and have their appointments been approved and registered so that they are authorized to bring or continue this action?  (It is to be noted that Mr. Foo had by then became another manager of the Heung).

Yuen J came to the view that –

(1)	A section 15 T’ong is one whose members would be devoted in common to the same worthy objectives such as those described in the Lockhart Report.  She held that a business T’ong is not covered by section 15.
(2)	The Heung was not a T’ong within section 15.
(3)	Even if it was a T’ong, the plaintiffs were not the registered managers of the T’ong at the time when action was commenced and therefore could not commence these proceedings.

History of the Heung

16. As to the history of the Heung, evidence was provided by an affirmation from Mr. Chong Kai Man.  Mr. Chong Kai Man was a member of the Heung.  His knowledge was based on information provided to him by his grandmother and aunt both of whom had passed away.  The aunt was at one time a member of the Heung.

17. In 1924, two gentlemen by the names of Wong Yuet Chiu and Lui Lap Ka (‘Mr. Lui’) formed an unincorporated company known as Chap Shing Company (‘Chap Shing’) with a view to inviting investors to participate in an investment project in Yuen Long, New Territories for the purpose of providing mutual benefits to its investors.  The investment project was named Wah Yan Mo Fan Heung (“華人模範鄉”) which means model village for the Chinese.  Chap Shing was a management company which provided management service to the Heung in return for a management fee.

18. The original idea of the investment was for the Heung to acquire land in the Yuen Long region.  A very small portion of the land would then be carved out into individual ‘house lots’ and then transferred into the names of the individual members in accordance with their share of interest.  This would enable these members to build their own dwelling houses on the land. 

19. The remaining but majority part of the land of the Heung would be put under the management of Chap Shing for the purpose of letting them out for farming in return for rent.  The rent derived from letting out the land would then be distributed amongst the members of the Heung in accordance with their share of interest in the Heung. 

20. Between 1924 and 1928 Chap Shing through Mr. Wong Yuet Chiu and Mr. Lui, collected money from intended investors who were willing to invest in the Heung.  Against such payment, certificates were issued to the investors.  The certificates certified the names of the investors and their share of interest of the Heung. 

21. During this period Mr. Wong Yuet Chiu and Mr. Lui used the money collected from the investors and acquired various agricultural land in the New Territories.  They then caused the land to be registered in the name of “Wah Yan Mo Fan Heung by its managers Wong Yuet Chiu and Lui Lap Ka”. 

22. In 1932 Mr. Wong Yuet Chiu and Mr. Lui caused part of the land of the Heung to be carved out so that the house lots could be allotted to the individual investors.  After the house lots were allotted to these individual investors they were registered as owners of these house lots.  The remaining part of the land were let out by Mr. Wong Yuet Chiu and Mr. Lui for and on behalf of the Heung in return for rental income.  

23. Due to the turbulent history of China starting from 1937 onwards, no house was ever built by the Heung or members on the land.  Because of World War II and the Japanese occupation of Hong Kong the only activities undertaken by the Heung was to let the agricultural land to farmers in return for rent.

24. Part of the land had been resumed by the Government and compensation was paid to the managers of the Heung. 

The District Office records

25. According to the memorial registered in the District Office of Tai Po, Mr. Wong Yuet Chiu and Mr. Lui had acquired land in two ways.  The first was as trustees of Chap Shing.  The second was in their personal names.  However on 30 December 1929, these lands were transferred to “Wah Yan Mo Fan Heung trustees Lui Lap Ka and Wong Yuet Chiu”.  Prior to the transfer, notice of the intended transfer was posted by the District Office.

26. As to the division of the land, according to the memorial dated 2 December 1932, it was recorded that ‘The property of Wah Yan Mo Fan Heung with Wong Yuet Chiu and Lui Lap Ka as trustees of 45 Wing Lok Street Hong Kong is hereby divided into the portions as in the attached list’.

27. Prior to the division, the District Office again posted notice of the intended division.

28. Mr. Wong Yuet Chiu died in 1959 and Mr. Wong Tat To was appointed as a manager in his place.  The appointment was registered by a memorial dated 4 January 1960.

29. Mr. Lui died in 1965.  Mr. Wong Tat To continued as the sole manager until 1984 when Mr. Wong Pui was appointed as a manager to replace Mr. Lui.  The appointment was registered by a memorial dated 15 September 1984.

30. Mr. Wong Pui died in 1987 and Mr. Wong Fook Pui and Mr. Wong Kwan Fat were appointed as managers to replace him.  The appointment was registered by a memorial dated 18 March 1988.

31. Mr. Wong Tat To died in 1989.  Mr. Chan and Mr. Tang were appointed as managers to replace Mr. Wong Tat To, Mr. Wong Pui, Mr. Wong Fook Pui and Mr. Wong Kwan Fat.  The appointment was registered by a memorial dated 28 January 1989.  According to a Notice of Appointment annexed to this memorial, this appointment was made at a meeting of the Heung on 28 January 1989 in which it was noted that since Mr. Wong Tat To had passed away, he was unable to explain the rights and authorities he had to appoint Mr. Wong Fook Pui and Mr. Wong Kwan Fat.

32. Mr. Chan died in 1997 and Mr. Foo was appointed as a manager in his place in 1999.

The recognition by the District Office

33. In April 2000, Mr. Tang and Mr. Foo as managers of the Heung commenced proceedings against the Secretary of Justice claiming that –

(i)	Mr. Chan and Mr. Tang were registered or entitled to be registered as managers of the Heung under section 15 of the NTO since 1989 and Mr. Tang and Mr. Foo were registered or entitled to be registered as managers of the Heung since 1999;
(ii)	the Director of Home Affairs was obliged to register them as managers of the Heung since 1989 and 1999 respectively; and
(iii)	the Director of Lands was obliged to pay compensation to them as such managers for the resumption in 1997 of certain lands registered in the name of the Heung.

34. A compromise was reached by the plaintiffs and the Secretary for Justice.  A Tomlin order was made by Yuen J on 30 August 2000.  Pursuant to the compromise, the District Office of Yuen Long by a letter dated 31 August 2000 acknowledged that:

‘	1.	The ‘Wah (or Wa) Yan Mo Fan Heung’ was, and still is, a t’ong within Section 15 of the New Territories Ordinance;
	2.	CHAN Kam Cheung and TANG Man kit were, between 1989 and 1999, managers of the said ‘Wah (or Wa) Yan Mo Fan Heung’ within the meaning of Section 15 of the New Territories Ordinance;
	3.	The said TANG Man kit and FOO Tak Ching, were, since 1999, and still are, managers of the said ‘Wah (or Wa) Yan Mo Fan Heung’ within the meaning of Section 15 of the New Territories Ordinance.’

35. The formal ‘Approval of Appointment of Manager’ was issued by the District Officer in respect of Mr. Foo on 31 August 2000.  The document was registered in the Yuen Long New Territories Land Registry by a memorial on 1 September 2000.

The issue cannot bereopened

36. The hearing before Yuen J started in June 2000 but had to be adjourned due to the non-availability of a witness who had fallen sick.  While the status of the Heung and the capacity of the plaintiffs might be a live issue when the hearing first commenced, by the time it was resumed in August 2000, the District Office had clearly recognised the Heung to be a T’ong under section 15 of the NTO.  The section provides that –

‘Whenever any land is held from the Government under lease or other grant, agreement or licence in the name of a clan, family or t'ong, such clan, family or t'ong shall appoint a manager to represent it. Every such appointment shall be reported at the appropriate New Territories District Office of the Home Affairs Department, and the Secretary for Home Affairs on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Secretary for Home Affairs, and shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land….’ 

37. The power to approve and register managers was vested by the NTO on the Land Officer, who was also the District Officer until 1982.  The NTO was amended in 1993 to vest such power on the Director of Home Affairs who was subsequently re-named the Secretary for Home Affairs.

38. If the Heung is such a T’ong, then it must possess such a status, at least, from 30 December 1929 when it began to hold land as a result of the transfer from Mr. Wong Yuet Chiu and Mr. Lui acting in their personal capacity and as trustees for Chap Shing to themselves acting as trustees for the Heung. 

39. Further if Mr. Chan and Mr. Tang were recognised as managers of the Heung from 1989 to 1999, then clearly they had the capacity to commence the action in 1990.  The District Officer’s approval of the manager can take effect retrospectively from the time the managers were appointed by the members: Light Ocean Investments Ltd v Enway Development Ltd [1994] 3 HKC 31, per Litton JA.

40. The approval by the District Officer was given pursuant to a statutory provision.  It was given not as a matter of formality but upon consideration of the law and facts.  The fact that the District Officer had in earlier years, namely in 1972, took a different approach as to the status of the Heung becomes irrelevant once the approval was given in August 2000. 

41. This decision must affect both the Heung, its managers and members on the one hand and also the Heung and the public on the other hand.  The recognition of the status of the Heung as a section 15 T’ong must be in the nature of a recognition ‘in rem’. 

42. In my view, until such time as the approval by the District Officer is set aside, it is not open to anyone, including the defendant in this case, to litigate on this issue again and challenge the status of the Heung and the plaintiffs.

43. The defendant, as an outsider of the Heung, had gone to undue length to challenge the status of the Heung and the managers when its stake in the land only came from the Heung and the mangers.  This is an extraordinary approach which in my view is totally unjustified.  It is worth repeating what Lord Millett NPJ said in the Court of Final Appeal :

‘...... the authority of the plaintiffs to represent the Heung was a matter of the Heung's internal administration and had nothing to do with the defendant. It was entitled to challenge their authority to represent the Heung, but its only legitimate interest in doing so was to ensure that it was not exposed to the risk of being made the subject of a second claim. It was entitled to be protected against this risk; but the proper way to protect it was not to enquire into the propriety of the plaintiffs' appointment, which was a matter between the plaintiffs and the Heung, still less to strike out the proceedings, but to make an appropriate representation order.’ 

44. The defendant had never applied for such an order. 

Application to stay the appeal

45. Counsel for the defendant, Mr. Jeremy Chan and Miss Phoebe Man, who did not appear in the court below, recognized the hurdle they faced and applied in the course of the submission to stay the appeal in order to allow the defendant to challenge the decision of the Secretary for Home Affairs.  In my view, this is not an option that is opened to the defendant at this stage.  Yuen J had refused to allow the defendant to intervene (and in my view rightly so) when the plaintiffs and the Secretary of Justice reached the compromise.  If the defendant considered its position has been affected by this development, then it should proceed with the application well before the hearing of this appeal.  It cannot simply stand by to see which view the courts may eventually take.  The defendant’s application for leave to apply for judicial review to challenge the approval was lodged in 2002 but was not proceeded upon.  The views expressed by the Department of Justice in March 2003 that the defendant should withhold its application pending the outcome of the appeal before Rogers VP and Le Pichon JA is simply not a sufficient reason for the defendant not to take any action earlier.  I will refuse the application.

Relevance of registration of approval

46. Yuen J recognised that the approval of the managers by the District Officer can be backdated to the date of the appointment.  But at the same time she was of the view that the registration of the District Officer’s approval of appointment could not have a retrospective effect and the plaintiffs could only have power to sue from 1 September 2000 onwards when the approval was registered.

47. In Light Ocean Investments Ltd the issue before this Court (Power VP, Nazareth and Litton JJA) was concerned with the ability of the vendors in the sale of land to show good title which in that case was dependent on the registration of the approval of three persons as managers.  The wording of section 15 is that

‘The (Secretary) … shall, if he approves (the appointment), register the name of the said manager who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Secretary….’

Title irrelevant

48. The present case, however, is not concerned with the question of title of the managers.  It is concerned with their capacity to sue to recover the land.  The question of title by registration is irrelevant.  As correctly pointed out by Mr. Anthony Neoh SC who together with Mr. Ernest Koo appeared on behalf of the plaintiffs, the person who is entitled to recover land rests on his right to possession of the land and not on his right to pass title to a third party.  In this case Mr. Chan and Mr. Tang were the approved mangers of the Heung between 1989 and 1999 and Mr. Tang and Mr. Foo were since 1999 and still are the managers of the Heung.  On this basis the plaintiffs clearly were in possession of the land in 1990 when they began this action to recover land.

49. The Heung has always been managed by trustees and managers.  In the context of New Territories landholdings by traditional organizations, terms like trustee, manager or SzeLei (司理) are synonymous: Tang Yau Yi Tong and Another v Tang Mou Shau Tso and Others [1996] 2 HKLR 212.

50. The land was let by Mr. Wong Tat To as manger of the Heung in 1966 to the defendant as a yearly tenant.  The Defendant had refused to deliver back the land to the Heung after the expiration of the notice to quit thereby trespassing on the land.  The then current managers then commenced the proceedings against it to recover the land.  I just do not see how in the circumstance the defendant could possibly argue that the plaintiffs have no right to bring the proceedings. 

Two principles

51. Two principles of law come into play.  First, an action for trespass can be maintained by someone in possession of the land: see Halsbury’s Laws of England (4^th Ed.) Vol. 45 Paras 1396 and 1397.  Second, estoppel by tenancy will preclude the defendant from raising this defence. 

Estoppel

52. As pointed out by the editors of Hill and Redman’s Law of Landlord and Tenant (17^th Ed.) Para 88, this estoppel has two aspects –

(1)	A tenant is prevented or estopped from denying the right of his landlord to grant the lease and, conversely, a landlord is prevented or estopped from denying the title of his tenant under the lease.
(2)	A person who has no legal estate in the land may nevertheless purport to grant a lease of that land; in that event, there is created between him and his purported tenant a tenancy by estoppel which binds them and their respective successors in title just as if the landlord had a sufficient interest to grant the lease.

53. The position is best stated by Lord Denning MR in Industrial Properties (Barton Hill) Ltd and Others v Associated Electrical Industries Ltd [1977] 1 QB 580:

‘If a landlord lets a tenant into possession under a lease, then, so long as the tenant remains in possession undisturbed by any adverse claim – then the tenant cannot dispute the landlord’s title.  Suppose the tenant (not having been disturbed) goes out of possession and the landlord sues the tenant on the covenant for rent or for breach of covenant to repair or to yield up in repair.  The tenant cannot say to the landlord: “You are not the true owner of the property.”  Likewise, if the landlord, on the tenant’s holding over, sues him for possession or for use and occupation or mesne profits, the tenant cannot defend himself by saying: “The property does not belong to you, but to another.’

The managers

54. That the managers always have the right to manage the land and the right of possession of the land is further demonstrated by the fact by the acts of the Government towards the Heung.  Despite the refusal by the Government to legally recognise the status of the Heung and its managers until August 2000, it had looked towards the mangers to be responsible for the management of the land belonging to the Heung.  It accepted the managers’ surrender of the land resumed by the Government and compensations for the resumption was paid to the managers and it regarded the managers being in a position to provide receipts for the compensation.  The Government had also treated the manager to be persons liable for rent and other charges of the land.  There was evidence that rates and property taxes were demanded by the Government from the managers and actions were brought against them for payment.  Further, as pointed out by Mr. Neoh, although there was no evidence before the court of payment of Government rent, it is reasonable to assume that such rent would in the normal course of events be demanded from and was paid by the managers. 

55. In my view, irrespective of the question of whether the managers would only acquire a legal title to the land upon the registration of the approval by the District Officer, the right of the mangers as landlords and as persons entitled to possession to recover the land can hardly be challenged.

Relevance of unincorporated association

56. Great play had been made by the defendant about the Heung being an unincorporated association; that the property of an unincorporated association must be held by trustees and since the plaintiffs were not trustees therefore they have no capacity to bring the action. 

57. This is to ignore the true nature of the plaintiffs’ claim: the right to bring the claim does not depend on whether the plaintiffs had the paper title to the land but rather on whether they have possession of the land and also on the existence of the landlord and tenant relationship between the parties which on the face of this case can hardly be challenged by the defendant. 

58. When Wong Tat To let the land to the defendant, he did so in his capacity as the trustee/manager of the Heung.  The office of the manager is transmitted to the current plaintiffs.  In view of the unique position of a manager of a traditional T’ong, I do not regard him as a mere agent of the members.  It can hardly be challenged that when Mr. Wong Tat To let the land he did not do so in his capacity as a manager but only ‘personally’ and therefore the current managers could not rely on the estoppel.  Likewise it can hardly be challenged that Mr. Wong Tat To was a trustee in the sense of a trustee of an unincorporated association and therefore had title to the land but not the current managers who are mere managers.

59. To do so is to ignore the context of this case.  The land is situated in the New Territories.  The Heung which held the land came into existence in about 1929.  This was in the early stage of the New Territories administration.  The time frame was 30 years after the administration of the New Territories was first given to the United Kingdom.  The fact that the land was actually conveyed to the trustees of the Heung and the managers’ subsequent application for registration of their office in the District Office whenever they became managers could only be consistent with the fact that those involved with the management of the Heung regarded the Heung as a traditional landholding organization which the District Officer finally recognised in 2000 to be a section 15 T’ong.  This clearly showed that the Heung was not an unincorporated association whose land have to be held by trustees in the legal sense of these terms.

60. In my view the right of the plaintiffs to possession of the land and the operation of the principle of estoppel are determinative of the issue of the capacity of the plaintiffs to bring this proceedings. 

61. Mr. Neoh submitted that in relying on the above principles, he does not even need to pray in aid the requirement that the Heung is a section 15 T’ong.  That may be so, but if the status of the Heung has been recognised to be a section 15 T’ong, it only reinforces the view that the plaintiffs could properly bring this action to recover the land.

The Heung is a section 15 T’ong

62. In any event, even if the status of the Heung could be determined afresh by the court, I am of the firm view that it must be a section 15 T’ong.  I would respectively adopted the analysis of Rogers VP in the first judgment.  I will only briefly summarise my position on this issue –

(1)	That the existence of a business T’ong as recognised in Tang Yau Yi Tong [1996] 2 HKLR 212 is clearly supported by contemporary literature: see the memorandum by Dr James W. Hayes entitled Tong & Tso in the New Territories (Hong Kong Government 19/12/1962).  A business T’ong is also recognised by the experts in this case, namely Professor Wejen Chang and Professor Anthony Dicks SC.
(2)	A communal landholding is not the only basis in which a business T’ong can be qualified as a section 15 T’ong.  The Lockhart Report did not impose such a restriction.
(3)	The context in which the Heung came into existence; the conveyancing of the land to the trustees of the Heung; the Heung have always been managed by managers and the steps taken by the managers to have their appointment registered with the District Office, clearly demonstrated against the view that the Heung was merely a label or style adopted by Chap Shing in holding its land.

Section 345(1) of the Companies Ordinance

63. The next question is whether the Heung offends section 345(1) of the Companies Ordinance, Cap. 32 which provides that:

‘No company, association, or partnership consisting of more than 20 persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the company, association or partnership, or by the individual members thereof, unless it is registered as a company under this Ordinance, or is formed in pursuance of some other Ordinance.’

64. An exemption is provided by section 16 of the NTO that in respect of any clan, family or t’ong owning land on 28 October 1910 with a registered manager and the land is used for agricultural, religious, educational or charitable purposes etc as certified by the Secretary for Home Affairs.

65. As the Heung did not own land in 1910, the section 16 exemption does not apply and one has to see whether the Heung falls within the prohibition of section 345.

66. Section 345 is based originally on section 4 of the United Kingdom Companies Act 1862.  Jessel MR in In re Padstow Total Loss and Collision Assurance Association (1882) 20 Ch D 137 held that the object of the section was that commercial associations or companies consisting of more than twenty members should be registered.

The factors

67. In considering the application of the section there are three relevant factors:

(1)	Is this an association?
(2)	If it is an association, whether it is formed for the purpose of carrying on any business?
(3)	Even if it satisfied this requirement, one still needs to consider who actually carries on the business: see Smith v Anderson (1880) 15 Ch D 247.

Association

68. It is clear from the cases in this field, whether a particular organization falls within the section depends on the nature of the organization and facts of the individual case.

69. In a general sense the Heung is an association of members which exceeded twenty in number.  However, it is still necessary to consider the nature of an ‘association’.  The individual members of the Heung acquired the house lots in the land which would be transferred to their names.  The remaining part of the land would be let and the rent would be distributed to the members in accordance with their share of interest as represented by the house lots they owned.  Apart from having a right to the part of the land belonging to them and having a right to the rent of the land belonging to the Heung, the members really do not have any mutual rights and obligations towards each other.  From the information disclosed, the interest of the members in the Heung is freely transferable.  Mr. Chong’s grandaunt transferred her interest to Mr. Chong’s aunt who in turn transferred it to Mr. Chong.  As James LJ observed in Smith v Anderson, persons who have no mutual rights and obligations do not constitute an association because they happen to have a common interest or several interests in something which is to be divided between them.  I would adopt the same approach and hold that the Heung is not an association within the meaning of section 345.

Business

70. As to the business aspect of this section, the Heung is a business T’ong.  However the term ‘business’ here is used to distinguish it from other t’ongs such as a family t’ong or religious t’ong.  One still needs to consider whether the Heung was set up for the purpose of carrying on business.  Brett MR in Shaw v Benson (1883) 11 QBD 563 held that in each case this will depend upon the inference to be drawn from the facts.  In Armour v Liverpool Corporation [1939] 1 Ch 422, Simonds J held that the test is: ‘whether that which is being done is what persons would describe as the carrying on of a business for gain.’

71. Applying these principles I think that the members of the Heung would be surprised if they were told that they had contracted with each other with a view to gain by entering into business transactions.  What they had really done was to invest money in a project which entitled them to have some shares in the land conveyed to themselves and also to receive rent from the land which had not been divided amongst themselves.  The project was not simply to operate a business of letting.  The main purpose must be one of investment.  Without having the individual house lots, the members would not even be entitled to the division of rent, because from the limited information we have in this case, the distribution will be based on their share of interest in the project by virtue of their landholdings.  My view is that the ‘business purpose’ aspect of section 345 is also not satisfied.

Managers carry out the business

72. In any event, I would regard the business to be carried out by the managers and not the members.  In view of the unique position of a manager of a traditional T’ong, I would not like to characterize him simply as an agent acting for and on behalf of the members and therefore rendered the members to be the ones carrying on the business.  This is not the case here.

Nature of proceedings

73. In many of the cases where section 345 was in issue, the association wished to enforce a contract it had entered into with another party.  The fact that the association may be illegal because it had not been registered does not mean the contract itself is also illegal.  This depends on whether the contract is in its very nature illegal.  This in turn depends on whether the terms of the contract was entered into in accordance with the rules of the association.  In other words, whether the transaction had for its object the carrying out of the illegal purpose of the association: see Shaw v Benson. 

74. In this case the issue is not concerned with the enforcement of a contract which is illegal because it was entered into pursuant to the objects of an illegal association.  The plaintiffs are merely seeking to recover land from a trespasser who has no right to remain on the land.  The nature of the proceedings is not tainted by illegality.

75. I do not regard this ruling will open a flood gate of actions by traditional t’ongs whichhave not been registered under section 345.  This is clearly a fact sensitive issue depending on the circumstances of an individual case.

Section 13 of the NTO

76. Mr. Neoh also relies on section 13 of the NTO which provides that in any proceedings in the Court of First Instance or the District Court in relation to land in the New Territories, the court shall have power to recognize and enforce any Chinese custom or customary right affecting such land.

77. Having reached my conclusion on section 345, it is not necessary for me to determine whether section 13 of the NTO overrides the requirement of section 345.

Consent to bring proceedings

78. One last question to be considered is whether the consent of the District Officer is required to bring this action in accordance with section 15 of the NTO.

79. In Man Ping Nam, the manager of Man Sham Chung Wui v Man Mei Kwai (CACV No. 193 of 2002) this Court (Le Pichon and Cheung JJA and Stone J) by a majority held that consent is not required when a manager leased land belonging to section 15 landholding organization.  I took the contrary view in that case.  I maintain that view.  However, the majority view must prevail in this case because of the application of the principle of precedence.  Moreover, while in a strict sense recovery of land is a form of dealing in land, its true nature is really an act of management of the land.  The Heung is not disposing of or removing the land from its control.  I do not regard consent from the District Officer is required.

Other matters

80. Mr. Jeremy Chan and Miss Phoebe Man had conducted the case on behalf of the defendant with ability and advanced many arguments in support of their client’s case.  I have considered their arguments but I do not think it is necessary to deal with all of them because I have chosen to deal with the essential issues which I believe to be determinative of this appeal.

Conclusion

81. Accordingly I will allow the appeal, set aside the judgment of Yuen J and order the case to be remitted to the Court of First Instance for trial.  I will make an order nisi that the plaintiffs are to have the costs of the appeal and below.

Hon Yeung JA:

82. I agree.

Hon Chung J:

83. I agree.

Hon Cheung JA:

84. There shall be an order of this Court in accordance with paragraph 81 above.