Ng Chung Ying Daydes v. Tang Man Kit Otherwise Known As Tang Man Kit, Terry and Another

HCMP 1439/2021

[2022] HKCFI 2347

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1439 OF 2021

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Before:  Hon K Yeung J in Chambers

Date of Hearing: 8 June and 19 July 2022

Date of Decision:  29 July 2022

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DECISION

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A.  Introduction

1.This is the substantive hearing of the Summons (the “Summons”) filed by the plaintiff (“P”) for the appointment of interim receiver pending determination of the Originating Summons herein.

2.Mr Kenneth CL Chan together with Mr Timothy YH Wong and Mr Samkei Chan appeared for P.  Mr Ronny Wong SC leading Ms Doris Li and Mr Ernest Wong appeared for the defendants (“D1” or “Tang”, “D2” or “Tinting”, and collectively “Ds”).

B.  The Originating Summons, and the Summons

3.On 27 September 2021, P took out the Originating Summons herein.  He seeks inter alia (1) an Order that a lease dated 23 July 2021 (the “Tinting Lease”) between Wah Yan Mo Fan Heung (華人模範鄉) (the “Heung”) as lessor and D2 as lessee over certain lots of lands owned by the Heung (the “Tinting Lease Lands”) be declared null and void, (2) an injunction restraining D1 from holding out as the manager of the Heung, (3) a further injunction restraining D1 from (i) representing and claiming that D2 is the lessee of the Tinting Lease Lands, (ii) contacting interfering with or making any demand to any tenant/occupier concerning the occupation or use of the Tinting Lease Lands, and (iii) contacting interfering with or making any demand to Bonus Investment Ltd (“Bonus”) in respect of the management of the Tinting Lease Lands provided by Bonus on behalf of the Heung, and (4) an Order appointing Ms Mendy Chong (“Ms Mendy Chong”), a solicitor, as receiver of the lands which belong to the Heung.

4.On 20 October 2021, P took out the Summons for interim relief, in the form of an order the appointment of Ms Mendy Chong as receiver pending the determination of the Originating Summons.

C.  The relevant affirmations

5.In support of the Summons, P has filed altogether 4 affirmations (“P/Aff1” to “P/Aff4”). 

6.In opposition, D1 has filed 2 (“D1/Aff1” and “D1/Aff2”).  He also relies on the affirmation of Tang Ting Kwan (“TK Tang” and “TK Tang/Aff”), and the affirmation of Chong Kai Man (“Chong” and “Chong/Aff”) which TK Tang produces as TTK-2 in TK Tang/Aff.  TK Tang is a director and shareholder of D2.  Chong is a practising barrister.  He says he is a member of the Heung, has been involved in the Heung’s affairs, been appointed “legal counsel” of the Heung, and has described himself as being “only concerned with the interest of the Heung as a whole.”    

D.  The core facts

7.Disputes over the Heung and the lands it owns go back a very long way.  They have given rise to quite a number of legal actions.  Cited below are only the core facts that are relevant to the present application.

8.The Heung is a business T’ong under section 15 of the New Territories Ordinance, Cap 97 (“NTO”), and has been recognised as such by the District Office.  I refer in this regard to the observations by Cheung JA in Tang Man Kit & Foo Tak Ching v Hip Hing Timber Company Limited (unreported, CACV 137/2002, 13 May 2005) at §36.

9.The Heung was set up many years ago for investment purposes.  The early history of the Heung has been summarized by Cheung JA in Tang Man Kit as follows:

“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.”

10.A number of managers had been appointed over the years.  D1 was appointed in 1989.  Foo Tak Ching (“Foo”) was appointed in 1999.  Their appointment has been, pursuant to section 15 of the NTO, approved by the Yuen Long District Office in August 2000[1], and registered in September 2000.

11.Foo passed away in 2020.  Between 1999 and 2020 when Foo died, D1 and Foo had been the only two approved and registered managers of the Heung.  Since Foo’s death, D1 has been the sole surviving approved and registered manager.

12.I have italicized the words “approved and registered” above for the following reasons.  Parties are in dispute as to whether P and Ms Pat Wong (“Pat Wong”) have been appointed by the Heung as additional managers.  P’s case is that they have been.  I will come later to the circumstances in which they are said to be appointed.  D1 says they have never been validly appointed.  But there is no dispute between the parties that P and Pat Wong have never been “approved and registered” as managers of the Heung under section 15 of the NTO.    

13.I can now, as I have done above, with the benefit of the Court of Appeal decision in Tang Man Kit recite with some confidence the nature and history of the Heung.  The position however had not been as clear before. Placed before me is a legal advice by Mr Robert Tang QC (as he then was whilst still in practice) back in 1996 (the “QC Opinion”)[2]. He was instructed to advise on the nature of the Heung.  He expressed the view that he was not able to do so on the information available to him.  He advised that an enquiry be conducted to ascertain amongst other things the nature of Chap Shing, the nature of the Heung, their relationship, who were or might be beneficially entitled to their assets and land, and the membership of the Heung.  Relevantly, he also advised, at §38[3], that:

“For the purpose of the inquiry, I believe representative orders should be made so that different interests will be represented. Such interests may include: ·

(1) original members of the Company and their assigns

(2) assignees of house lots and their assigns

[insofar as shares in the Company and the house lots might have devolved differently, there is a potential conflict of interest between these 2 classes]

(3) Government, because of possibility of bona vacantia.”

14.Whilst the nature of the Heung has now become clear, the uncertainties in relation to its membership linger on.  Despite the QC Opinion, no formal legal proceedings had been commenced to clarify the same until, as I shall explain, 2017.

15.Delineation of the criteria for qualification as members is important. The membership of those who held both the share certificates of Chap Shing and the interest in the lots designated therein (and their assigns) is less controversial.  But over the years, there have been occasions when the certificates and the interests in the corresponding lots were separately assigned.  Should assignees of only certificates without any interest in the lands tied to them, or reversely assignees of interests in land without the relevant certificates, be regarded as members?

16.There is also the case of bona vacantia, as mentioned in the QC Opinion.

17.Such uncertainties surrounding the criteria for qualification as members have, perhaps understandably, created tension amongst various stakeholders. Some may want the criteria to be as narrow as possible, so that their interest will not be diluted.  Some other want the criteria to be wide, else they would not be included.

18.P’s position, as he has stated in a previous affirmation in a related action, is that membership is dependent upon ownership of “the house lots in the Heung with corresponding share certificates of Chap Shing Company and that their membership had been approved by the managers of the Heung when they purchased the same”[4].

19.In July 2013, three members of the Heung commenced HCA 1342/2013 (“HCA 1342/13”) against D1.  One of them was Chong.  It was alleged amongst other matters that D1 had breached his fiduciary duties owed by him as a manager to the Heung. 

20.D1 disputes that action.  He says that HCA 1342/13 was instituted “to operate as a slur on” his reputation.

21.Up till now, HCA 1342/13 is still pending, and has not been concluded.

22.By notice dated 4 October 2013 (the “2013 Notice”)[5], Foo called for a meeting of the Heung to be held on 26 October 2013 (the “2013 Meeting”).  It is P’s case that during that meeting, the attending members passed a resolution removing D1 as manager of the Heung (the “1^st Removal Resolution”), and appointing Pat Wong as an additional manager in his stead.

23.In January 2014, Foo and Pat Wong commenced HCA 83/2014 (“HCA 83/14”) against inter alios D1.  Breaches of fiduciary duties similar to those pleaded in HCA 1342/13 were again alleged.

24.By notice of 17 July 2014 (the “1^st 2014 Notice”), Foo called for another meeting of the Heung to be convened on 23 August 2014 (the “2014 Meeting”).  By another notice of 7 August 2014 (the “2^nd 2014 Notice”) in respect of the 2014 Meeting, Foo gave further notice setting out the proposed resolution to demand D1 to deliver up all documents and chattels of the Heung.  It is P’s case that during the 2014 Meeting ultimately convened, the attending members passed resolutions having the effects of (1) ratifying and confirming the 1^st Removal Resolution (the “2^nd Removal Resolution”), and (2) requiring D1 to return all the documents and chattels of the Heung (the “Delivery Up Resolution”).

25.Later in 2014, Foo as manager of the Heung commenced HCMP 3361/2014 (“HCMP 3361/14”) to enforce the Delivery Up Resolution.  The trial took place before Deputy Judge Kent Yee who in September 2015 handed down his Judgment (the “3361 Judgment”).  The Heung’s action was dismissed.  Parties have different interpretation in respect of the exact scope of the 3361 Judgment. P’s case is that the learned Deputy Judge only considered therein the validity of the Delivery Up Resolution, which he held to be invalid due to inadequate or defective notice, but that the validity of neither of the 1^st or 2^nd Removal Resolutions had been challenged or ruled upon.  Mr Wong on Ds’ behalf submits that P’s interpretation and understanding of the 3361 Judgment is wrong.  I will come back to this.

26.Whilst the exact scope of the 3361 Judgment is in dispute, the learned Deputy Judge did at §§44 and 47 observe that:

“44. This court, very rightly, is not called upon to determine the membership of the Heung. It is not within the ambit of the OS to start with. Absent such a determination, this court can hardly be satisfied that all the members of the Heung were given notice of the 2^nd [2014] Notice and hence the proposed Delivery up Resolution. This is an additional reason why the Delivery up Resolution cannot be upheld.

…

47. … For important decisions to be decided by members collectively such as the removal of Mr Tang as manager, it is imperative to first determine the membership of the Heung and worthwhile to wait for such a determination. There is a valid reason why the Yuen Long District Office has persistently refused to act on the Removal Resolutions and the Appointment Resolution.”

27.Referring to previous applications for removal and appointment of managers of the Heung, the Yuen Long District Office (“YLDO”) by letter of 15 December 2015 said that:

“Having regard to the comment in paragraph 47 of the [3361 Judgment], we have shelved the processing of the application for removal and appointment of manager of [the Heung].”

28.In March 2017, Foo in his capacity as one of the two managers of the Heung took out an Originating Summons under HCMP 724/2017 (“HCMP 724/17”).  The purpose of the Originating Summons is to seek the court’s adjudication on the Heung’s membership.  D1 was not joined as a co-applicant in his capacity as the other manager, but named in his personal capacity as the 3^rd Respondent.   

29.As I have mentioned above, Foo passed away in June 2020.  Parties in HCMP 724/17 were originally in dispute as to who should take over Foo’s place as the plaintiff in that action.  Rival applications had been taken out by Chong on the hand and D1 on the other.  The hearing took place before this Court on 21 April 2022.  In the course of that hearing, parties informed this Court that they had come to terms.  I granted by consent Chong leave to intervene and took over from Foo as the plaintiff in that action.  Date for the substantive hearing of HCMP 724/17 has not been fixed.

30.P claims that he has been appointed as a manager of the Heung.  He has not in any of his affirmations dealt with the details of his alleged appointment, but only that “[with] the support of other Heung members, on 21^st April 2020 I applied to the YLDO to be appointed as an additional manager of the Heung”[6], and that “the [Yuen Long Land Office] has not registered Ms Pat Wong or I as managers in spite of our elections as managers by the Heung”[7].  He has produced some of the documents which he had submitted to the YLDO in support of his application for approval and registration.  One of them is entitled “會議錄” dated 21 April 2020[8].  The location of the meeting was recorded as “家訪”.  There are 2 other documents suggesting that certain members of the Heung had signed signifying their consent to P’s appointment.

31.On top of the disputes and uncertainties outlined above, also relevant is the involvement of Bonus and Tinting.

32.The sole director and shareholder of Bonus has been May Cheung.  By a letter dated 22 January 2014 signed by Foo and Pat Wong as managers (but not D1)[9], Bonus was appointed as the Heung’s agent to handle its lands and rental affairs. 

33.The validity of Bonus’s appointment will be dependent upon the validity D1’s removal, and also Pat Wong’s appointment as manager.

34.Between 2017 and 2021, Bonus[10] on behalf of the Heung entered into some 11 leases or renewed leases in relation to some of its lands (the “Bonus Tenancies”).  Average rental income of about HK$350,000 has been produced.

35.The validity of those leases is disputed by D1.  The treatment of the rents received, their uses, whether such uses were authorized, and whether they were available to the Heung, are in dispute[11]. What is however clear from some of the tenancies and the unaudited accounts of Bonus[12] is that a substantial amount of those incomes have been disbursed towards legal expenses.  Mr Wong in the course of the hearing called the funds “war chest” kept by Bonus and P.

36.Tinting was incorporated on 27 May 2021, with paid up capital of HK$100. TK Tang and Ho Sung Sing (“Ho”) are its founder members and directors, holding 75 and 25 of the shares respectively. 

37.As have been mentioned above, the Tinting Lease is dated 23 July 2021.  The Heung is the lessor.  D1, described as the manager, is the sole signatory for and on behalf of the Heung.  Chong is the witness to that signature, who is also described as “the Consultant of the Lessor”[13]. Tinting is the lessee.  TK Tang and Ho signed on its behalf.  The Tinting Lease Lands are set out at Part 3 of the First Schedule.  There are 260 lots of them.  The term is for 10 years, with an option on the part of Tinting to renew on terms to be agreed[14]. The monthly rent for the first 5-year period is HK$300,000, to be increased to HK$400,000 during the second 5-year period.  There is a rent free period of 6 months[15]. It contains further the following Special Conditions in Part 7 of the First Schedule, which Mr Chan highlighted in the course of the hearing:

“1. All rental deposits, rentals and money payable to the Lessor under this Lease shall be paid to a firm of solicitors to be directed and nominated by Tang in consultation with [Chong] (‘the Consultant of the Lessor’) which shall be deposited into an account to be held upon trust for the sole benefit of the Lessor and no part thereof might be used other than for the benefit of the Lessor.

…

4. Notwithstanding Clause 3(a)[16] and without prejudice to Clause 2(w)[17] of this Lease, the Lessee declares, acknowledges and confirms that certain parts of the said premises have been occupied by persons without licence or consent of the Lessor as at the date of this Lease by constructing certain structures or articles thereon (‘the Occupied Lands’). The Lessee agrees that the Lessor shall not be required to take any action to recover possession of the Occupied Lands in order to lease the said premises to the Lessee.

The Lessee agrees that it would be the contractual obligation of the Lessee to recover possession, arrears of rent and/or mesne profits (if any) of the Occupied Lands. For such purpose, the Lessor hereby irrevocably grants exclusive power, right and authority to the Lessee to do so either in the name of the Lessor or in its own name as the Lessee, and it shall be the contractual obligation of the Lessee to shoulder and bear all costs and expenses inclusive of the costs of instituting legal proceedings for recovery of the Occupied Lands.

The Lessee further agrees that any recovered damages, arrears of rent and/or mesne profits (if any) that accrue before the date of this Lease shall belong to the Lessor while those that accrue after the date of this Lease shall belong to the Lessee.

5. Whenever the Consultant of the Lessor with the authority of Tang request the Lessee so to do in writing, the Lessee shall:-

(a)  take all necessary steps, means and efforts to recover possession of any part of the land owned by and for the benefit of the Lessor in occupation of vacant or illegally occupied by third parties; thereof [sic]

(b)  for the purpose of (a) above, to bear and shoulder all costs and expenses in so doing which shall include, inter alia, the costs of conducting survey and legal costs in taking all and any necessary legal proceedings and actions so as would enable the Lessor to regain, recover or obtain possession, occupation and control of the same either directly or indirectly.

6. Certain parts of the said premises have previously been let by the Lessor to various tenants under written tenancies in return for rental income and, subject to the provisos herein provided, the Lease hereof is granted subject to all existing tenancies and, for the avoidance of doubts, upon the parties entering into this Lease, the Lessee shall be entitled to:

(i) recover and receive rental income from such lettings by the Lessor;

(ii) grant sub-leases and/or sub-tenancies in return for rental income;

Provided that:

(a) the Lessee shall, throughout the term of this Lease, discharge its contractual obligations thereunder;

(b) For the avoidance of doubt, no previous tenancy would be recognized by the Lessor as valid unless and until those having been signed by the Lessor through it managers, namely;

(i) Foo and Tang jointly during the lifetime of Foo; and

(ii) Tang solely after the death of Foo.

(c) The rental income derived from such previous tenancies referred to in sub-paragraph (b) above would have been received by the Lessor directly.

(d) No part of the said premises designed and designated as private roads and means of access to individual private lots should be considered as valid.”

38.On 27 September 2021, P took out the Originating Summons herein formally challenging the Tinting Lease.  On 20 October 2021, P took out the Summons for appointment of Ms Mendy Chong as the interim receiver.

E.  The law on the appointment of receivers

39.The applicable principles are not in dispute.  I have been cited Kerr & Hunter on Receivers and Administrators (21^st ed) §§2-35 to 37, 2-53 and 2-61, Re Zealot & Co Ltd [2008] 1 HKLRD 386 per Kwan J (as the VP then was) at §§30 and 34, and Macau First Universal International Ltd v Ding Xiaohong [2011] 3 HKLRD 27, per Deputy Judge Au-Yeung (as Her Ladyship then was) at §§38-39.  In summary, this court may by order appoint a receiver in all cases in which it appears to the court to be “just or convenient to do so”[18].  The power is a discretionary one.  The American Cyanamid principles are by analogy applicable.  The remedy is however flexible.  The overriding consideration in the exercise of that discretion is the demands of justice.  In general, the court appoints receivers in two classes of cases: to enforce right, and to preserve assets.  In the latter type of cases, the main issues to be considered are whether there is a serious question to be tried, whether there is a real risk of dissipation of assets, and where the balance of convenience lies.  Whilst exercising its discretion, the court should bear in mind that the remedy is an intrusive one, more expensive, and less reversible than the granting of an injunction.  The applicant hence must show that other less intrusive remedies would be inadequate.  In granting interlocutory injunction, the modern approach is that the court should take whichever course seemed likely to cause the least irremediable prejudice to one party or the other.   

40.I apply the above.

F.  Parties’ stances

41.Mr Chan submits that an interim receiver should be appointed.  In summary, he relies on the 1^st and 2^nd Removal Resolutions.  He submits that D1’s authority as a manager is in serious doubt. He submits that D1 now attempts to abuse his manager-ship on paper by inter alia causing the Heung to let most of its lands to D2 by the Tinting Lease at a serious undervalue.  He compares the rent which the Bonus Tenancies secure with those payable under the Tinting Lease.  He emphasizes the 6-month rent free period provided in the Tinting Lease.  He points to the terms and conditions of the Tinting Lease (and in particular the parts which I have reproduced above).  He submits that the Tinting Lease is not only not in the interest of the Heung, but also involves arrangements of maintenance and champerty.  He submits that Ds’ acts pose serious jeopardy to the Heung’s assets, so that an independent third party shall be appointed to preserve the Heung’s assets promptly. 

42.For a matter that has gone back so far, there is obviously a lot of background.  In the course of his oral submissions, Mr Chan highlighted some to me matters like the 1^st and 2^nd Removal Resolutions, that those Resolutions were passed by essentially the same group of members who originally appointed D1, the allegations made against D1 in HCA 1342/13 and HCA 83/14, and a number of letters written by Chong to members of the Heung which show the contrast of his initial criticisms against D1 with his subsequent willingness to be a witness of and a consultant under the Tinting Lease.  I have considered all those background matters.  However, as Mr Chan rightly and fairly accepted, the most important event in the context of the present Summons remains the Tinting Lease, without which there would be little basis for P to seek any interim appointment of receiver. 

43.Mr Wong’s submissions, in gist, are that the present application is made by a person with no official capacity and whose membership in the Heung being in grave doubt, for an intrusive relief, not to cure the real problems confronting the Heung, but to use the interim measure of receiver to retain unauthorised management of the Heung’s assets on a long-term basis, so that P and his camp could legitimize the unauthorised Bonus Tenancies, and continue to misappropriate the Heung’s funds.  D1 has never been validly removed, and is clearly the approved and registered manager.  There is no vacuum in management.  Pat Wong has clearly not been validly appointed.  Bonus has not been validly appointed.  The Bonus Tenancies are invalid.  If any interim receiver were to be appointed, the invalidity of the appointment of Bonus and the Bonus Tenancies would be ratified[19]. Mr Wong identifies the questions before this court as follows, (1) what are the assets that are at stake, and (2) whether the appointment of receiver is the proper means to address the problem.  He submits that there is no imminent danger of loss or dissipation of the Heung’s assets.  There is no just basis for the Court’s exercise of discretion.  The application is a blatant abuse of the court’s process and must be dismissed. 

44.I will first of all consider a number of specific issues which parties have made submissions on (which encapsulate also the issues identified by Mr Wong in his oral submissions made during the second day of the hearing on 19 July 2022).  When considering those specific issues, I remind myself that this is not the substantial hearing of the Originating Summons.  This Court is not invited to rule on the issues involved.  And I should not.  I only express my views to the extent which I believe are sufficient to rule on the Summons, and would not go anywhere beyond lest the trial of the Original Summons be prejudiced – see Kerr & Hunter at §2-35.

G.  The 3361 Judgment

45.As I have mentioned above, parties are in dispute as to the scope and effects of the 3361 Judgment.

46.At §13(1) of his written submissions, Mr Chan submits that Deputy Judge Kent Yee in HCMP 3361/14 only considered the validity of the Delivery Up Resolution, and that the validity of the 1^st and 2^nd Removal Resolutions had never been judicially challenged or adjudicated upon. 

47.Whilst it is true that Chong (as counsel for the Heung in HCMP 3361/14) did say to the learned Deputy Judge that the “court is not concerned with the validity of [the 1^st and 2^nd Removal Resolutions]”[20], I do not accept Mr Chan’s submissions in the above regards. 

48.To start with, D1 did challenge the propriety of the 2013 and 2014 Meetings.  Mr Wong has taken me to parties’ correspondence relevant to the challenge.  But even without going to those letters, D1’s non-acceptance of the propriety of those meetings is recorded by the learned Deputy Judge at §11 of the 3361 Judgment.

49.At §16 of the 3361 Judgment, the learned Deputy Judge, having recited Chong’s request to him to disregard the issue in relation to the validity of the 1^st and 2^nd Removal Resolutions, observed that:

“16. … without my determination of this validity issue, this court cannot uphold the validity of the Delivery up resolution predicated upon the valid removal of Mr Tang as manager.

17. On this ground alone, this court should dismiss Mr Foo’s application by the OS.”

50.Immediately after that, the learned Deputy Judge proceeded to consider the adequacy of the 1^st and 2^nd 2014 Notices, which impacted upon the validity of the 2014 Meeting and the Delivery Up Resolution.  He ruled that the Delivery Up Resolution was invalid on two main bases:

(a)  The first basis concerns the mode of service of the relevant notices.  In that respect, the learned Deputy Judge noted the distinction between the 1^st 2014 Notice and the 2^nd 2014 Notice.  The 1^st 2014 Notice was advertised, but did not mention the Delivery Up Resolution.  The 2^nd 2014 Notice did mention the Delivery Up Resolution, but had not been advertised, and was only posted to those members whose correspondence addresses were kept by the Heung;

(b)  He observed at §28 that for an effective notice to be given to all of the Heung’s members regarding important resolutions to be decided at a forthcoming meeting, the Heung should publish the relevant notice in local newspaper in good time;

(c)  On that basis he ruled that the 2^nd 2014 Notice was inadequate. As the 2^nd 2014 Notice was the only notice which mention the Delivery Up Resolution, it followed that the Delivery Up Resolution was not valid;

(d)  This first basis therefore may not have a direct bearing on the adequacy of the 1^st 2014 Notice;

(e)  The second basis was however not one which was independent of the first, and raised a question of substance that linked back to the uncertainties surrounding the membership of the Heung.  In relation to that, the learned Deputy Judge recited Mr Wong’s submissions that “the Heung is in a ‘complete state of flux’ and so there cannot be a collective expression of the wishes of the members of the Heung …”.  He made reference to the QC Opinion advising that an enquiry was necessary to determine the membership of the Heung and who the beneficiaries of the assets of the Heung were.  He noted that no such enquiry had ever been made despite the lapse of almost 2 decades.  He made reference to the agreed expert evidence and observed that “the 1^st and 2^nd Removal Resolutions underpinning the Delivery up Resolution were the most important decisions in a business t’ong.  All members must have been duly notified beforehand so that they could opt to take part in the meetings and had an open and fair discussion about the issues”.  He then made the observation at §§44 and 47 which I have reproduced above.  On this additional basis, he ruled that the Delivery Up Resolution could not be upheld.

51.The above observations of the learned Deputy Judge, and the uncertainties in relation to the membership of the Heung, are relevant to one further aspect of the 1^st 2014 Notice.  Although the 1^st 2014 Notice had been advertised, the advertisement[21] contained the following remarks, that,

“Any members of the Heung who intend to attend the meeting should bring along the share certificates issued by ‘Chap Shing Company’ … to such meeting otherwise he will not be allowed to attend the meeting including making any representation and giving any comments. Further, he will not be allowed to vote thereat in respect of the aforesaid resolutions unless his identity has already been confirmed.”

Those remarks had the effect of shutting the meeting to other classes of persons who could be members of the Heung (as I have discussed above).

52.With the above in mind, there are in my view good bases in support of the following conclusions:

(a)  the 2013 Notice and the 2^nd 2014 Notice, both only posted but not having been advertised, are inadequate and invalid;

(b)  the 2013 Notice and the 1^st and 2^nd 2014 Notices were inadequate given the uncertainties in relation to the Heung’s membership (and in the case of the 1^st 2014 Notice given also those remarks in the relevant advertisement); and hence

(c)  the effects of the 3361 Judgment are that the 1^st and 2^nd Removal Resolutions are invalid.

H.  The approved and registered status of D1

53.As I have recorded above, the YLDO has, having regard to the comment by the learned Deputy Judge in paragraph 47 of the 3361 Judgment, shelved the processing of the application for removal and appointment of manager of the Heung.  As I have further recorded above, it is common ground that D1 has never been removed as a registered Manager, and Pat Wong (nor P) has been approved or registered as such.

54.Under section 15 of the NTO, the approval and registration of a manager as such is not a procedural formality, but are both substantive steps prerequisite to the acquisition of and removal from that status.  As observed by Anthony Chan J in Tsang Shu Wo v Person Unknown in Occupation of Lot No. 2643RP in D.D.120, Yuen Long, New Territories, Hong Kong & Anor[2020] HKCFI 293 at §53:

“I do not believe that Kwok’s[22] status as a Manager can be changed simply by the tendering of his resignation and acceptance by the members. Both the appointment and replacement of manager are subject to the approval of the Secretary pursuant to s.15 of the Ordinance. It must be the case that prior to the approval by the Secretary of his replacement, Kwok remains a Manager and is liable for the obligations under s.15.”

55.I accept Mr Wong’s submission, on the strength of Tsang Shu Wo, that a registered manager within the meaning of section 15 remains as such until and unless the appointment is terminated by the District Office pursuant thereto. 

56.Under the NTO regime, the power to deal with Tso property is conferred solely on the managers and no one else, and that they shall act unanimously. As observed by Chu J (as Chu JA then was) in Tang Kam Wah & Ors v Tang Ming Yat & Anor (unreported, HCA 10141/1998, 26 November 2002) at §72:

“Under Section 15, the power of dealing with Tso land, including the granting of a lease, is vested in the manager. Accordingly in exercising the power to let, the manager being trustees are required to act unanimously: Lewin on Trust (17th edn) p.737. The consent of only one manager from each of the two Tsos in question is insufficient to make the Lease a valid and binding one. It also follows that the unanimous decision of managers cannot be overridden by the decision of the members of Tso because under Section 15, the power to deal with Tso property is conferred solely on the managers and no one else: per Litton JA (as he then was) in Light Ocean Investments Ltd, at p.40. This being the case, even if the defendants were to succeed in proving the existence of the Pleaded Custom, the Lease remains invalid and unenforceable by reason by Section 15.”

57.In relation to D1’s status as one of the approved and registered managers (and now the only surviving one), Mr Chan submits that D1 had been removed by the same group of members who appointed him back in 1989.  Given my view on the invalidity of the 2013 Notice and the 1^st and 2^nd 2014 Notices, and the fact that D1 has remained the approved and registered manager, I fail to see how that can assist P’s case.

58.Mr Chan uses[23] the term “his managership on paper” when describing D1’s status as the Heung’s manager.  But as I have observed above, the approval and registration of a manager under section 15 are both substantive steps under the NTO regime.  Such approval and registration is not simply “on paper”, nor something that is merely titular.

59.Mr Chan points to the various allegations that have been made against D1 in HCA 1342/13 and HCA 83/14.  I note them.  But they remain only pleaded allegations that have not been substantiated.

60.In his written Further Submissions, Mr Chan submits that after the 1^st and 2^nd Removal Resolutions, and until the death of Foo in 2020, D1 had been absent from the management of the Heung, had either been guilty of acquiescence (if he was still a manager), or had himself realized that he had been removed[24].

61.I have considered those submissions.  They do not affect the legal position that D1 has remained a registered manager of the Heung, and has been the sole surviving registered manager after Foo’s death.

62.Further, I note in this context D1’s evidence[25]. He says that his relationship with Foo remained strained after the 3361 Judgment.  He issued a letter of 13 October 2016[26] to members of the Heung maintaining, with reference to the 3361 Judgment, inter alia his status as one of the managers of the Heung.  He says that Foo had apparently refused to work with him.  He says further that he had no contemporaneous knowledge of certain of Foo’s acts, which he would not have sanctioned had he known about them.    

63.In my view, the above matters constitute good bases in support of the following, that:

(a)  D1 was not validly removed by the 1^st and 2^nd Removal Resolutions;

(b)  Pat Wong was not validly appointed during the 2014 Meeting;

(c)  Neither Pat Wong nor P in any event has been approved and registered as managers under section 15 of the NTO;

(d)  During the time when Foo was still alive and during the period when he and D1 were the only approved and registered managers, they had to act unanimously in dealing with the Heung’s lands;

(e)  After Foo’s death, D1 solely has the power under the NTO regime to deal with the Heung’s lands; and

(f)  There has been no vacuum in so far as the management of the Heung is concerned.  

I.  The Bonus Tenancies

64.As I have set out above, the validity of Bonus’ appointment as the Heung’s agent to handle its lands and rental affairs will be dependent upon the validity of D1’s removal, and upon Pat Wong’s appointment as manager.

65.I have expressed my view on the appointment of Pat Wong.

66.At the time when the appointment letter was signed in 2014, D1 was one of the two approved and registered managers.  He was not party to that appointment letter.  Foo failed to act unanimously with D1.

67.On my views set out above, there are good bases for suggesting that the appointment of Bonus, and hence the Bonus Tenancies, are invalid for want of authority and power.  I am of the further view that Mr Wong’s concern about the risk of any appointment of interim receiver to receive any payment from the Bonus tenants (past and future, which Mr Wong submits should only be received as mense profits but not as rental income) having the effects of ratifying the invalidity of both Bonus’ appointment and the Bonus Tenancies, or being relied upon by the Bonus tenants as having such effects, is a real one. 

J.  The Tinting Lease

68.I have pointed out above the undisputed fact that since the death of Foo in 2020, D1 has been the sole registered manager of the Heung.  I have also made observations above on the power of registered members under the NTO regime.

69.The Tinting Lease was dated 23 July 2021, at which stage D1 was the sole surviving registered manager of the Heung.

70.There is good basis in support of Mr Wong’s submissions that D1 has full power under section 15 of the NTO to enter into the Tinting Lease, which power in law cannot even be overridden by members of the Heung[27].

71.Mr Chan relies on the terms of the Tinting Lease in submitting that the Tinting Lease is not in the interest of the Heung.

72.I do not find Mr Chan’s submissions in this regard take P’s case far:

(a)  Mr Chan highlights the rent free period offered by the Tinting Lease.  The existence of a rent free period in a tenancy is however not uncommon.  I cannot draw from it against D1 any adverse inference of impropriety;

(b)  Mr Chan has compared the level of rents secured respectively by the Tinting Lease, the Bonus Tenancies and another lease which has been called the Swing Luck Tenancy[28]. He has submitted[29] that the Tinting Lease is at an undervalue;

(c)  The direct comparison between the rental income secured by those different leases, without any related comparison between the relative qualities of the lots of land involved, the expenses involved, and the nature of the obligations of the respective lessees, is in my view hardly probative;

(d)  For example, after adjustment of the relevant expenses, even Mr Chan accepts that the Bonus Tenancies in 2020 and 2021 would effectively have yielded only HK$126,000 and HK$228,000 per month respectively;

(e)  There is evidence before me that amongst the lands owned by the Heung, only those that are subject to the Bonus Tenancies could be put to constructive use[30], and the rest are less capable of being put into meaningful use and hence much less income bearing;

(f)  In respect of the Swing Luck Tenancy, Mr Wong has pointed out Clause 2 in the 3^rd Schedule of the same[31], which is in effect a clawback in favour of the lessee (should it exercise its option to renew) for inter alia “the costs and expenses of the Lessee incurred in recovery of the Land, or any part thereof, so as would enable the same to be subsequently let out”.  There is no such clawback provision in the Tinting Lease;

(g)  P has adduced a valuation report on the monthly rental value of certain “Trespassed Lots” and “Undevelopable Lots”.  But in making those valuations, the costs in recovering vacant possession or in rendering the lots developable have not been factored in;

(h)  Related to the above, there are also the various contractual obligations on the part of Tinting under the Tinting Lease, and in particular that of Tinting “to recover possession, arrears of rent and/or mesne profits (if any) of the Occupied Lands”.  As Mr Wong has pointed out, Tinting does not have the benefit of actual physical possession of those “Occupied Lands”, and it has to incur costs and expenses in seeking repossession, which process may take years.  All these affect the level of the rent which can be commanded under the Tinting Lease;

(i)  Mr Chan stresses that Tinting pursuant to the Tinting Lease would be entitled to receive or be distributed some of the specified arrears of rent and mesne profits.  That is true.  But Tinting and the Heung’s respective entitlement to those arrears or mesne profits are fixed with reference to the dates of accrual of those income, which, as submitted by Mr Wong and I agree, is consistent with the legal rights of the Heung and Tinting as landlord and tenant.  What should also be noted is Tinting’s contractual obligation to recover possession etc of the Occupied Lands at its own costs.  Any fruit of Tinging’s successful performance of such obligations will be enjoyed by the Heung in reversion, and would be very valuable to the Heung;

(j)  Mr Chan submits[32] that “The insertion of Special Condition No. 5 … would seem to suggest that D2, in spite of the terms of Special Condition No. 4, may choose to ignore its mandatory obligations and hence providing room for [Chong] to make requests to D2 to fulfil its mandatory obligations”.  I do not accept that that is a fair and objective interpretation of the relevant clauses.  There is nothing which suggests that Special Condition 5 acts in derogation of Tinting’s contractual obligation under Special Condition 4;

(k)  In any event, there are in my view merits in Mr Wong’s submissions that Clause 4 and Clause 5 address different lands, in that the former applies to “Occupied Lands” as defined, whilst the latter relates to other “land owned by and for the benefit of the Lessor in occupation of vacant or illegally occupied by third parties”.

73.Mr Chan stresses that Tinting has only pay-up capital of HK$100, and that no guarantee has been sought from its directors and shareholders.  I have taken those points into account.  But there is no evidence before me at this stage that Tinting has not been able to perform its obligations under the Tinting Lease.

74.Mr Chan complains that the Tinting Lease was entered into in secrecy. It should be noted that Chong, then an antagonistic party against in HCMP 724/17, has been asked as the witness.  In any event, and as a matter of law, D1 as the only surviving registered manager indeed had the sole power to enter into the Tinting Lease.

75.Mr Chan also submits that the Tinting Lease involves arrangements of maintenance and champerty.

76.I have been cited a number of authorities, which include Unruh v Seeberger [2007] 2 HKLRD 414 (in particular §84), HKSAR v Mui Kwok Keung [2014] 1 HKLRD 116 (and in particular §62), and Beijing Tong Gang Da Sheng Trade Co Ltd v Allen & Overy [2015] 3 HKLRD 247 (in particular §§45-53).

77.Mr Chan has submitted in clarification, and repeated in his written Further Submissions[33] that this Court is not being asked to decide on the champerty point, which will be considered in the substantive hearing.  That obviously is correct.  And that being the case, I will not go into details the relevant law, save respectfully citing the following passages, that:

“… the fact that an arrangement may be caught by the broad definitions of maintenance or champerty is not in itself sufficient to found liability. The totality of the facts must be examined asking whether they pose a genuine risk to the integrity of the court’s processes.”[34]

“What is important is that ‘all the aspects of the transaction should be taken together for the purpose of considering the single question’ whether there is, in the words of Fletcher Moulton J in British Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006 at 1014, ‘wanton and officious intermeddling with the disputes of others in which the [maintainer] has no interest whatever, and where the assistance he renders to the one or the other party is without justification or excuse’ (Giles v Thompson [1994] 1 AC 142 at 164B).”[35]

78.I have considered D1’s evidence on the reasons for the negotiation and execution of the Tinting Lease[36]. He says that his relationship with Foo had been strained.  Foo’s death severed the deadlock between them in relation to the management of the Heung’s affairs.  On 31 August 2020, he made a tour of the lands held by the Heung to update the state of their occupation.  He classifies them into 3 types: (1) those which are in effect the lands covered by the Bonus Tenancies (which he calls the “Unauthorised Lots”); (2) those held by occupiers through tenancies granted by the Heung before the breakdown of his relationship with Foo (which he calls the “Tenanted Lots”); and (3) lands held by trespassers who proceeded to erect structures thereon (which he calls the “Trespassed Lots”, and are similar in nature to those lots given the same description by the surveyor engaged by P).  He says that the problems posed by the Trespassed Lots were not fresh ones.  Resolution of the problems created by those lands require substantial funding.  He knew TK Tang.  TK Tang is a well-known estate agent.  He holds one certificate in Chap Shing[37]. He expressed interest in extending finance to the Heung to resolve the problems.  D1 was aware of the scale of the legal costs involved.  He on the other hand realized the immense capital value of any land that might be recovered by TK Tang and Tinting’s efforts.  The Tinting Lease was negotiated and agreed upon against such considerations.  It was concluded bona fide in the best interests of the Heung.

79.I have considered the above evidence against the criticisms which Mr Chan has made (as I have summarized and discussed above).  I have considered all the aspects of the transactions raised in the course of arguments.  I have considered Mr Chan’s submission on the issue of pre-existing interest.  I note that Mr Chan at §11 of his written Reply Submissions mentions what he describes as the “‘access to justice’ exception” to the definition of maintenance and champerty[38], and submits that that exception has no application as the Heung has substantial cash kept on account.  However, the validity of that submissions will be dependent upon whether the funds in what Mr Wong describes as “war chest” kept by Bonus and P would be available to the Heung or D1 for instituting proceedings against Bonus and the Bonus tenants in relation to the Bonus Tenancies. The likelihood is that they are not, though these are clearly not matters that can be resolved at this stage.  

80.In all, I am of the view there are good bases in support of Mr Wong’s submissions that the arrangement set out in the Tinting Lease may not be said to have posed any genuine risk to the integrity of the court’s process, and that both Tinting and TK Tang as a tenant and as a Heung’s member have proper and legitimate common interest in the recovery of the Heung’s land.

K.  Whether any property in jeopardy

81.Mr Chan has clarified and reiterated[39] that:

“This application is founded entirely on the notion to preserve the status quo of the Heung, avoiding most of its landed properties being placed irrevocably for 10 years in jeopardy.”

82.Mr Wong invites this Court to step back and look at the reality.  The Unauthorised Lots and Trespassed Lots are the useable lands of the Heung.  The former lots are in the possession of the Bonus tenants.  The latter ones are by definition being occupied by trespassers.  The Tinting Lease is designed to tackle them.  Proceedings have and are to be instituted to recover possession from the Bonus tenants and the trespassers.  The Court’s process operates as the best protective regime to safeguard and preserve all interests.  Pre-action letters have been issued in some cases.  And according to D1[40], on instructions from himself and Tinting, counsel have drafted writs against Bonus and occupiers for recovery of possession of the Unauthorised Lots, that proceedings can be instituted, but are only on hold pending the results of the Originating Summons and the Summons herein.  In relation to the Trespassed Lots, Mr Wong alternatively relies on Tang Man Kit & Foo Tak Ching the Managers of the Wah Yan Mo Fan Heung v Chong Kee Ting Vicwood alias Chong Kam Hing trading as Victory Plywood Door Manufacturing Company (unreported, HCA 1222/2010, 14 July 2011) wherein Mr Recorder A Chow SC (as he then was) held that the defence of adverse possession is not sustainable as a matter of law in so far as the land of the Heung is concerned[41].

83.Mr Chan’s main complaint appears to be that the Tinting Lease Lands are leased to Tinting at an undervalue, and they are in jeopardy in the sense that the position will get locked in for 10 or potentially 20 years. 

84.I have in fact expressed my view on that complaint above, albeit from a different angle.  Bearing in mind Tinting’s contractual obligations under the Tinting Lease, the potential benefit to the Heung as landlord in reversion, and the various matters which I have discussed in Section J above, I am not satisfied that P has established that the Tinting Lease Lands have been leased at an undervalue to such an extent that they may be regarded as being in jeopardy, so that an intrusive remedy in the form of the appointment of an interim receiver should be appointed.

85.In any event, the Tinting Lease has indeed been entered into.  The Originating Summons is pending.  Until and unless the Tinting Lease has been declared null and void upon trial of the Originating Summons, the Tinting Lease Lands would remain locked in by the Tinting Lease, and I do not see how the appointment of an interim receiver could adequately address that.

L.  Whether just or convenient, and the exercise of this Court’s discretion  

86.Whilst I have expressed the views that there are good bases in support, against P’s case, of the various conclusions which I have set out in the Sections above, I am prepared to accept that P has established a number of serious issues to be tried.  The validity of D1’s removal, the validity of the appointment of Pat Wong and Bonus, the validity of the Bonus Tenancies, and the validity of the Tinting Lease (including whether it involves any arrangement of maintenance and chamberty) all in my view qualify.

87.However, having consider those specific matters above, and in the light of my views on them, I am of the view that it is neither just nor convenient to appoint any interim receiver.  Before me is a case in which the Tinting Lease was entered into by the sole registered manager of the Heung.  There are good bases in support of the conclusion that he has not been validly removed.  But irrespective of that, and irrespective of how according Mr Chan unpopular D1 is as a manager, he remains registered as such, and has the sole power to deal with the Heung’s lands.  The mechanism of the lease has been affirmed on oath to be for the purpose of securing funds to recover possession of the Unauthorised and Trespassed Lots for the common good and interests of the Heung.  An objective reading of the terms of the Tinting Lease is not inconsistent with that.  The Tinting Lease has been entered into.  The Tinting Lease Lands are in occupation, at least all the valuable ones are.  D1 says that instructions for initiation of legal proceedings for their recovery have been given.  Mr Chan complains that the level of rent should have been much higher.  The so called jeopardy which Mr Chan says the Tinting Lease Lands are at concerns at best (or at worst) the related rental difference.  But the evidence on the allegation of undervalue is at best equivocal.  The allegations of blocking of emergency vehicular route is part and parcel of the problems which the Trespassed Lots have given rise to, and are not fresh ones.  In any event, until and unless the Tinting Lease has been declared null and void, having an interim receiver to step into the performance of the Tinting Lease would create potentially more problems.  Depending upon what the interim receivers does, legal challenges by the tenants may well be envisaged.  And one has to come back to the interim nature of the application.  Extensive evidence has been filed.  Mr Chan, upon this Court asking, expressed the view that the Originating Summons can be ready to be set down after perhaps a final round of evidence which may be completed within a month.  The hearing of the Originating Summons will not be long ahead.  The appointment of an interim receiver to step into a dispute as long-standing and complicated as the present one will simply create more costs and problems, and trigger more litigations.

88.I am of the view that the demands of justice are against the application.

89.The above are in my view more than sufficient to dispose of the application.  I have not gone into certain other further matters which Mr Wong has raised, which include the worth of any undertaking for damages which P has offered, which I agree is dubious.   

M.     Disposition

90.For the above reasons, I dismiss the Summons.

N.  Costs

91.I make a costs order nisi that P shall bear the costs of the Summons, to be summarily assessed, with certificate for 2 counsel.  Any application for variation may be made by letter within 14 days to the clerk of this Court, upon receipt of which I will give further written directions, with the view that the application be dealt with on the papers.

92.I am grateful to counsel for their assistance.

Mr Kenneth CL Chan, Mr Timothy YH Wong and Mr Samkei Chan, instructed by Liu, Choi & Chan, for the Plaintiff 

Mr Ronny FH Wong SC leading Ms Doris Li and Mr Ernest Wong, instructed by Shum Wong & Co, for the 1^st and 2^nd Defendants