LOK TIN CHOI v. LAI KWAI LIN

CACV 146/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 146 OF 2014

(ON APPEAL FROM HCMP 315 OF 2012)

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J U D G M E N T
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Hon Cheung JA :

Background

1.1  The plaintiff (‘the son’) is the son of the defendant (‘mother’) and Mr  Lok Sang Cheung (‘the deceased’).  The son was born in 1971.  The deceased died in 1984 when the son was 12 years of age.  The deceased’s estate consisted of, for the purpose of this case, interests in eight lots of land in Demarcation District No. 111 in the New Territories namely, whole share in Lot No. 1805, 1811, 2437 and 2434B and one third share in Lot No. 2394, 2402, 2415 and 2413 RP.

1.2  The deceased’s two brothers had the other two third share in Lot Nos. 2394, 2402, 2415 and 2413 RP.

1.3  Pursuant to the then section 17 of the New Territories Ordinance (Cap 97) (‘NTO’) the son succeeded to the estate of the deceased with effect from 4 March 1984.  As the son was still under age, the mother was appointed as his trustee.

1.4  The deceased’s two brothers transferred their shares in Lot 2413 RP to the son.  This lot had since been disposed of by the son after it was vested in him by the mother and this appeal is concerned with the remaining seven lots of land.

1.5  The deceased had five daughters, three of whom are married and two are unmarried.  The son is living separately with his own family in the house built on Lot 2437.  The address of this lot is known as No. 104, Wang Toi Shan Tsuen, Fan Kam Road, Pat Heung, Yuen Long (‘the 104 House’). The mother and her two unmarried daughters live in the house built on Lot 2434B. This is located at No. 107 of the same address of the 104 House (‘the 107 House’). The house has been the family home of the deceased and his family.

1.6  In 2010, two other lots of the estate, namely, Lot No. 1805 and Lot No. 1811 which were located in Choi Yuen Village (菜園村) were resumed by the Government for the purpose of building the Guangzhou - Shenzhen - Hong Kong Express Rail Link.  The Government agreed to pay compensation of $8,555,404.80 for the resumption.  The Government is still holding this money pending the resolution of this case. 

1.7  In 2012, the son commenced the present proceedings asking for, amongst other things, the mother to vest the seven lots of land in him.  The mother, on the other hand, raised a counterclaim, seeking, amongst other things, a declaration that in accordance with Chinese law and custom the son should maintain her for life and to provide dowries (if applicable) for the two unmarried daughters.  She also seeks enforcement of a family agreement reached on 8 November 2010 concerning the distribution of the compensation money, namely, $4.05 million is to be paid to the son and the mother for the purpose of rebuilding the two houses.  $1 million is to be paid to the son and $3.5 million is to be paid to the mother absolutely as maintenance for life.

1.8  Deputy High Court Judge Saunders ordered the five lots of land which have not been resumed by the Government to be vested in the son.  As rightly pointed out by the Judge, since Lot Nos. 1805 and 1811 had been resumed, they could no longer be vested in the son.  Instead, he granted a declaration that the son was immediately prior to the resumption, the beneficial owner of these two lots and is entitled to all the rights arising from the resumption.  There is no controversy on this aspect of the judgment.

1.9  In respect of the mother’s counterclaim, the Judge rejected her evidence that there was a family agreement concerning the distribution of the compensation.  He further held that he had no jurisdiction to apply Chinese custom or customary rights to the compensation money.  He held that Chinese custom or customary inheritance rights appear now to be limited solely to New Territories land and not to personalty.

1.10  While the parties had called expert evidence on the Chinese custom of making provision for the maintenance of parents and provision of dowry for unmarried daughters, the Judge held that it was not necessary for him to address this evidence in the light of his decision on jurisdiction.

1.11  There was an issue at the trial that the mother had negotiated the compensation without the knowledge and consent of the son.  This is no longer a matter that concerns this appeal.

The mother’s appeal

2.  The mother now appeals against the dismissal of her counterclaim.  Mr Kenneth Wong on her behalf submits that the compensation is still subject to Chinese custom which requires the son to maintain the mother and provide dowry for the two unmarried daughters.  This is the only issue in this appeal.  The mother has not argued that the Chinese custom she relied upon apply to the other five lots of land which have not been resumed.

Compensation from the resumption and Chinese custom

3.1  In order to ground jurisdiction, Mr Wong has to show that the case comes within the original section 13 of the NTO (1984 Revised Edition) and the new section 13(1) of the current edition NTO which provides that in proceedings in the High 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 land.  This provision was interpreted in Tang Kai Chung & Another v Tang Chik Shang & Others [1970] HKLR 276 to mean that the Court must recognise and enforce Chinese custom and customary rights in such proceedings.

3.2  The son no longer has the land, namely, Lot Nos. 1805 and 1811 and is instead entitled to compensation that arises from their resumption.  Mr Wong submits that the majority decision of this Court in Tang Che Tai and others v. Tang On Kwai and others (CACV 137/2007, Judgment dated 25 January 2008) came to the view that Chinese law and custom applies to compensation money. 

3.3  The context of Tang Che Tai and others was land in the New Territories which was designated as Tong (堂) land for ancestral worship but had since been resumed by the Government and compensation paid for the resumption.  The issue in that case was concerned with how distribution of the compensation should be made.  The plaintiff’s case was that there should be no distribution without unanimous consent.  The defendant’s case was that distribution should be in accordance with a 1982 decision of the members of the Tong, which provided for compensation money to be distributed partly per capita and partly per stirpes.

3.4  This Court was unanimous on the outcome of the appeal but there was difference in views on whether Chinese law and custom applied to the compensation that arose from the resumption of the Tong land.  Tang VP (as he then was) at paragraph 11 held that :

‘ … The land before resumption would have been covered by section 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 insofar 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.” ’ (emphasis added)

3.5  He, however, went on to hold that :

‘ 12. However, as Bokhary PJ pointed out in Re Lau Wai Chau at page 100:

“ … Our law even disapplies the rule against perpetuities where such disapplication is necessary for the purpose of enforcing Chinese law and custom in Hong Kong.”

13. A consequence of this is that an endowment in perpetuity of such compensation money for the purpose of ancestral worship would not be void.  A similar trust unrelated to land in the New Territories would be void. See Ip Cheung Kwok v Ip Siu Bun and Ors [1988] HKC 437.’

3.6  My approach is at paragraph 57 :

‘57. In my view there is no difficulty involved to regard the applicable law on compensation as Chinese customary law.  If the land immediately before resumption is subject to Chinese customary law, the compensation which is only given by virtue of the land must likewise be subject to the same system of Chinese law.  In my view in considering the compensation, one must not confine the examination to its existing state and say that because it is not in the nature of physical land therefore it is not land within the meaning of section 13 of the NTO.  But rather to approach it on the basis that as the land itself has always been subject to Chinese law, the conversion into compensation does not change this characteristic: the recognition given by section 13 will continue to be observed after the resumption.  Put in another way, in conducting this inquiry, it is wrong to approach it from the angle of an examination of the definition of land to see if ‘compensation’ somehow fits into the meaning of land, but rather approach it on the basis that the compensation which came from the resumed land has always been imprinted with this characteristic.’ (emphasis added)

3.7  There seem to be suggestion raised at the hearing that I had treated compensation as land within its definition under section 2 of the NTO. While I held that Chinese law and custom applied to the compensation, as can be seen from the part of the judgment which I have underlined above, I had in fact eschewed from holding compensation comes within the definition of land which is under the ambit of section 13 of the NTO.  The basis of my decision is that Chinese law and custom applied to the compensation because the resumed land itself had always been imprinted with the characteristic of an ancestral worship Tong under Chinese law and custom.

3.8  Lam J (as he then was) agreed that the definition of land under the NTO does not include compensation money but held that Chinese custom applied for the following reasons :

‘79. As a matter of logic and common sense, I agree with the observations of Cheung JA regarding the undesirability of having a different system of law governing the compensation money. In fact, as explained below, I will go further and say such a result will be unjust and oppressive.

80. Article 18 of the Basic Law provides that the law in force in Hong Kong shall be, amongst others, the laws previously in force in Hong Kong as provided for in Article 8.  Article 8 says that the laws previously in force in Hong Kong includes common law and customary law.  Hence, the restrictions on the application of the English common law and the rules on the applicability Chinese customary law previously in force before 1 July 1997 shall continue to be the law in Hong Kong.

81. Before 1 July 1997, the restriction on the application of English common law to Hong Kong had been set out in Supreme Court Ordinance 1844 and the Application of English Law Ordinance 1966.  Section 3 of the 1844 Ordinance reads:

“ 3. And be it further enacted and ordained, that the law of England shall be in full force in the said Colony of Hong Kong, except where the same shall be inapplicable to the local circumstances of the said Colony, or of its inhabitants ... ”

82. Section 3 of the 1966 Ordinance provided that common law shall be in force in Hong Kong “so far as they may be applicable to thecircumstances of Hong Kong and subject to such modifications thereto as circumstances may be required”.

83. It has been established in Hong Kong that these statutory provisions mean that English common law is not applicable if its application would cause injustice or oppression and in such circumstances, the court can apply Chinese customary law: see Re Tse Lai-chiu [1969] HKLR 159.

84. It follows that the non-application of a particular English common law principle to cases where it would cause injustice or oppression is part of the law previously in force in Hong Kong prior to 1 July 1997.  In such situations, the court in Hong Kong can apply Chinese customary law.  As explained above, by reason of Articles 8 and 18 of the Basic Law, this remains to be the position today.

85. The underlying rationale for holding that the rule against perpetuities should not be applicable to Tso or Tong holding New Territories land is that it would destroy these types of social institutions, see Tang v Tang [1970] HKLR 276.

86. If the common law rule against perpetuities were to apply to the compensation money payable on resumption of Tso or Tong land in the New Territories, it would bring chaos to the administration of the Tso or Tong.  Mr Ho submitted that in such event, the ancestral worship trust will fail and there comes into existence a resulting trust in favour of the settlor.  But there can be all sorts of difficulties in identifying the settlor (as pointed out by Mr Ho, the name of the Tso might not be the name of the settlor)and the rightful beneficiaries to his estate.  It may take lengthy costly proceedings by way of administration actions or other forms of legal actions to resolve the matter.  Such proceedings may cause serious dissension amongst the members which can be destructive to the social cohesion essential to the clan.  In my view, the imposition of such a burden on the Tso is unjust and oppressive.  This provides the jurisdictional basis for holding that the rule against perpetuities shall not be applicable to Tso holding compensation monies on account of resumption of lands in the New Territories.  Similar view was held by Deputy Judge Tang QC (as he then was) in Kan v Kan [1987] HKLR 516 at p.527.’

3.9  The fact that Lam J and I held in that case that Chinese law and custom applied to the compensation from the resumption of the Tong land does not mean that the same rationale would apply to the compensation in this case because our view then must be properly considered in the context of that case.  Here, unlike that case, the two lots of land which had been resumed were not imprinted with the institution of a Tong.  In the absence of this special feature Mr Wong has to show that somehow section 13 of the NTO still applies to the compensation in this case.  He has not advanced any other arguments on this issue.

3.10  The definition of land in section 2 of the NTO has not made reference to compensation arising from resumption or proceeds of sale of such land.  In my view Mr Wong has not overcome the statutory definition of land upon which Chinese law and custom may be invoked.

Pre-cessational law

4.1  Mr Kelvin Liu on behalf of the son objects to the application of Chinese custom to the compensation on two grounds.  First, section  13 of the NTO does not cover compensation.  Second, Chinese law and custom as existed in 1843 and which remained in force in Hong Kong in respect of maintenance for widow and dowries for unmarried daughters had been modified or effectively replaced by the extensive legislative change in 1971 such as the Deceased’s Family Maintenance Ordinance (1971) (Cap 129) (‘DFMO’).  He labels the 1843 laws as the pre-cessational law which is a reference to the position before the cessation of Hong Kong to the British government.

1)  Deceased’s Family Maintenance Ordinance

4.2  Since the section 13 point has already been addressed, I will focus on the second point.  The DFMO was introduced in the early 1970’s as part of the law reform package that includes the Marriage Reform Ordinance 1970 and Intestates’ Estates Ordinance (Cap 73) (‘IEO’).  The DFMO has since 1995 been replaced by the Inheritance (Provision for Family and Dependants) Ordinance (Cap 481) (‘IO’).  Section 4 of the DFMO conferred power on the Court to order payment out of net estate of a deceased for the benefit of his dependants.  However, the definition of net estate in section 2(2) does not include land to which Part II of the NTO (which includes section 13) applies and which has not been exempted by the Governor under subsection (2) or (3) of section  7 of that Ordinance from the provisions of that Ordinance.

4.3  Although Mr Wong has not responded to this point, it should not be taken that I have accepted Mr Liu’s submission that the DFMO had replaced the Chinese custom relied upon by the mother.  If the statutory definition of ‘net estate’ in the DFMO does not include New Territories land and if the actual net estate consists solely of such land, then a dependant of such an estate will have no recourse to the DFMO.  In the circumstances it would be most odd that a dependent in the position of the mother in the present case will have her right under Chinese law and custom being removed as well.

2)  Intestates’ Estates Ordinance

5.1  IEO whichwas also referred to at the hearing before us further illustrates this point.  Section 4 of the IEO (1971 Edition) provides for succession to the estate of a deceased on intestacy.  However section 11(1) excludes its application to New Territories land (which has the same meaning attaching to it under section 2 of the NTO).  Section 11(2) provides that such land shall continue to devolve upon intestacy in like manner as it would have devolved if the IEO had not been enacted.  Again, if all that the estate consists of is New Territories land, I do not see how in the circumstances it can be said that this legislation must have replaced the relevant Chinese custom.

5.2  However, another point on the IEO should be considered by the mother’s legal advisers.  Since compensation does not fall within the meaning of land under the NTO,it is for them to consider whether there is any proper basis to apply for relief under the IEO in respect of the compensation.

Expert evidence

6.  As the Judge had refrained from addressing the specific Chinese law and custom raised in this case, I will likewise refrain from doing so beyond saying that the implication and the mechanism of implementing this Chinese custom, if it is applicable, in 21^stcentury Hong Kong require detailed discussion.

The son’s offers

7.1  The son, to his credit, has in his 4^th Affirmation made open proposals for the maintenance of the mother which I will set out :

‘ 9. Without prejudice to my rights, I again list out the items mentioned in my 3^rd Affirmation that I plan to provide to the Defendant as follows:-

(i) HK$5,000 per month to the Defendant for life (life expectancy alleged by the Defendant is 23 years, i.e. HK$5,000  x 12 x 23 = HK$1,380,000).

(ii) Around HK$400,000 being the proposed renovation and fitting-out costs for the No. 104 House in order to maintain or improve the living standard of the Defendant.

(iii) The Defendant would live at the No. l04 House until she passes away.’

7.2  This is clearly something for the mother to consider.

Conclusion

8.  The mother’s appeal is accordingly dismissed with costs to the son.  The mother’s own costs are to be taxed in accordance with the Legal Aid Regulations.

Hon Kwan JA :

9.  I agree with the judgment of Cheung JA.

Hon Barma JA :

10.  I agree.