Liu Tse Wah Alias Edmund Tse Wah Liu and Others v. Liu Chee Kwan and Another

CACV 228/2023, [2026] HKCA 1752

On appeal from [2023] HKCFI 1658

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 228 OF 2023

(ON APPEAL FROM HCA NO 953 OF 2017)

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BETWEEN

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.This is an appeal by the 1^st to 5^th plaintiffs (“P1” to “P5”) against the judgment of Deputy High Court Judge MK Liu given on 23 June 2023 dismissing their claims (“Judgment”)[1]. Judgment was given after a trial which lasted eight days.

2.The two defendants, Liu Chee Kwan (廖滋鈞; “D1”) and Liu Wai Man (廖惠民; “D2”) are managers of Liu Wing Sing Tong (廖允升堂; “LWST”), an ancestral tong in the New Territories.  D2 was appointed in July 1977.  D1 was appointed in October 1992.  Save for P3, all the parties in this action are members of the Liu clan in Sheung Shui.

3.Liu Hon Fan (廖翰芬alias Liu Kit Tseung 廖傑祥, of the 19^th generation of the Liu clan) was a member of LWST, Liu I Mou Tong (廖怡懋堂), Liu Sam Chuk Tso (廖三祝祖; “LSCT”) and Liu Kau Ngo Tso (廖九我祖), which were set up in veneration of the person in whose name the tongs and tsos were established.  When Liu Hon Fan passed away in 1955, his five sons each became the head of a family or fong (“five fongs”).  P1 Liu Hon Wong (廖漢旺, since deceased)[2] was the head of his fong and his son P4 Liu Chee Yuen Johnny (廖滋遠) is a member.  P4 has become the head of this fong with the passing of P1.  P2 Liu Tse Wah Edmund (廖滋華), son of Liu Hon Kee (廖漢基) who passed away in 2007, is the head of another fong.  P2’s son, P5 Liu Ho Kwong Henry (廖浩光), is a member of P2’s fong.  D1 Liu Chee Kwan (廖滋鈞), a son of the late Liu Hon Yin (廖漢彥), is the head of yet another of the five fongs.

4.These proceedings brought by Ps are not representative proceedings under Order 15 rule 12 of the Rules of the High Court.  Each plaintiff is suing in his personal capacity and is not representing anyone else (save for P3 where Liu Tse Wah Edmund is suing as administrator of the estate of his father Liu Hon Kee).  No other members of LWST and no other individual or institution shown in the agreed family tree[3], including LWST, is a party in these proceedings[4].

The plaintiffs’ claims in this action

5.The writ in this action was issued on 20 April 2017.  In the order dealt with in the submissions of Mr Ian Chau (he appeared for Ps on appeal and below) in this appeal, these are the claims of Ps against Ds in this action:

(1)  P1 and P2 claimed against D1 and D2 for failure to provide documents for inspection regarding the administration of LWST despite repeated requests and demands. (“Production of Documents Claim”)

(2)  P1 and P4, and P2 and P5, being two of the five fongs, claimed against D1 in respect of the annual payments (丁口錢; “Ding Payments”) distributed by LSCT to all members of LSCT, which included the five fongs.  The head of a fong would be entitled to receive Ding Payments on his own behalf as well as on behalf of his sons and grandsons.  D1 collected Ding Payments from LSCT but failed to distribute them to P1, P4, P2 and P5 for certain periods. (“Ding Payments Claim”)

(3)  P1 and P2 claimed against D1 and D2 for having failed to pay rates for various landed properties of LWST when those rates fell due, thereby causing loss to P1 and P2. (“Failure to Pay Rates Claim”)

(4)  P1 and P2 claimed against D1 and D2 for using LWST’s funds to pay their legal fees for this action, alleging that the purported authorisation in a resolution (“2017 Resolution”) at an extraordinary general meeting on 20 May 2017 was invalid. (“Invalid Authorisation of Legal Fees Claim”)

(5)  In respect of Lot 415 in Demarcation District 87 (“Lot 415”; a piece of land owned by Liu Hon Fan and succeeded to by his five sons[5]), it was alleged that D1 in breach of his duties as “Agent/Trustee/Helper” allowed unlawful occupiers to occupy and use the land (“Unlawful Occupation Event”), causing loss and damage to P1, P2 and P3. (“Lot 415 Claim”)

(6)  P1 and P2 claimed against D1 and D2 for letting these three properties of LWST at an undervalue, thereby causing loss to P1 and P2: (i) Lot No 369 in DD 51 (“1^st Property”); (ii) shop on ground floor (comprising front portion and rear portion) and cockloft at No 45 San Fung Avenue, Sheung Shui (“2^nd Property”); and (iii) shop on ground floor and cockloft at No 20 San Hong Street, Sheung Shui (“3^rd Property”) (collectively “Properties”). (“Letting of Properties at Undervalue Claim”)

6.Ps claimed as a result of the breaches of trust and/or fiduciary duties, Ds are liable to pay compensation to LWST, and P1 and P2 is each entitled to a 1/20 share of the compensation that should be paid to LWST.

7.In the trial, P1, P2 and P4 gave evidence and called Tse Hing Tung (“Tse”), a former clerk of their solicitors, Wong, Hui & Co (“WH”), to testify.  D1 and D2, as well as two treasurers of LWST, Liu Tsun Ka (廖進家; “TK”) and Liu Chi Fai (廖志輝; “CF”), gave evidence in support of Ds’ case.

8.The parties also adduced expert evidence of valuers on the market rentals of the Properties at different points of time.  The judge did not find it necessary to decide which of the experts’ opinion was to be preferred.

The holdings in the Judgment

9.Having seen and heard the factual witnesses, the judge found[6]:

(1)  P1 and Tse are not reliable witnesses.  Save for matters which are not in dispute, the judge refused to attach weight to their evidence[7];

(2)  P2’s evidence is of limited assistance[8];

(3)  P4’s evidence, regarding the part in respect of which he has personal knowledge, is truthful and reliable[9];

(4)  Save on the issue of Ding Payments and on the issue of P4’s requests for documents of LWST, D1’s evidence is reliable[10]; and

(5)  Save on the issue of P4’s requests for documents of LWST, TK’s evidence, CF’s evidence and D2’s evidence are reliable[11].

10.The judge dismissed the six claims of Ps for these reasons:

(1) Production of Documents Claim – The judge declined to exercise his discretion in favour of production because Ps have not discharged the burden of pleading and proving sufficient material facts to warrant such a wide range of disclosure[12];

(2) Ding Payments Claim – Ps had failed to plead a proper legal basis upon which they could hold D1 liable in respect of Ding Payments[13].  Likewise, D1 should not be allowed to rely on an alleged settlement concerning Ding Payments to P1 for any time prior to and including 31 December 2011 as a defence, which had not been pleaded in the re-amended defence and is disputed by P1.  Both sides should be held to their own pleadings[14];

(3) Failure to Pay Rates Claim – Resolutions had been passed in the meetings of LWST on 31 December 2013, 31 December 2016, 20 May 2017 and 31 December 2018 that legal costs and interest resulting from proceedings brought by the government for outstanding rates should be paid by LWST (“Rates Resolutions”)[15]. Ps’ challenge to the validity of the Rates Resolutions must fail because not all the members of LWST were made parties in these proceedings[16], and Ps should not be allowed to take the point that the Rates Resolutions could only be passed by unanimous consent of all the members as this has not been pleaded[17]. In any event, having regard to the background leading to the failure to pay rates, Ds had not failed to discharge their duties as managers of LWST[18];

(4) Invalid Authorisation of Legal Fees Claim – Ps’ challenge of the validity of the 2017 Resolution cannot succeed.  Not all the members of LWST were made parties in these proceedings[19]. Ps should not be allowed to raise the point that the 2017 Resolution could only be passed by unanimous consent of all the members as this has not been pleaded[20]. The 2017 Resolution was passed by the majority of the members present in the May 2017 meeting.  If Ps are putting forward a case that the 2017 Resolution had not been agreed to by the absolute majority of the members of LWST, Ps have not shown by evidence that apart from P1 and P2, there was any other member who was in disagreement with the 2017 Resolution[21];

(5) Lot 415 Claim – Ps have not pleaded a proper basis upon which the obligations of D1 as “Agent/Trustee/Helper” referred to in §§14(a) and (b) of the re-amended statement of claim (“RASOC”) are regarded as legally enforceable[22]. In any event, the judge found on the evidence that the obligations of D1 did not include the obligation to look after and manage Lot 415[23].  The Unlawful Occupation Event cannot be said to have been caused by the breach of duties by D1[24]. Ps have not pleaded or proved what D1 had failed to do causing the Unlawful Occupation Event and this is fatal to the claim for 1/5 of the reinstatement costs[25], and the claim for reimbursement of the legal costs incurred by P1 and P3 in bringing HCA 313/2014 to evict the unlawful occupiers[26].  Besides, the judge also found that D1 had in fact recovered possession of Lot 415 in late 2013 or early 2014, so it was unnecessary for P1 and P3 to bring that action[27];

(6) Letting of Properties at Undervalue Claim – Ps have not pleaded or proved what Ds had done or failed to do and, as a result of the actions or inactions, LWST had suffered loss regarding the letting of the Properties[28].

11.As the judge dismissed all the claims brought by Ps, he did not find it necessary to resolve the limitation issue raised by Ds[29].

This appeal

12.A notice of appeal settled by Mr Chau was filed on Ps’ behalf on 21 July 2023.  The grounds of appeal ran to 65 numbered paragraphs.  Each and every ruling in the Judgment against Ps was challenged.  Some of the challenges – on the deficiency of pleadings, the need to join all members of LSWT as parties in these proceedings, the issues of limitation – relate to matters of law.  The others are challenges to findings of fact of the trial judge.

13.We turn to consider each of the six claims of Ps dismissed by the judge.

Production of Documents Claim[30]

14.This claim was brought by P1 and P2 and was pleaded in §39 of RASOC:

“1^st and/or 2^nd Defendant’s Failure to Provide [LWST] Documents

39. In breach of their duties mentioned in paragraphs 21(d), (e) and/or (g) hereof, despite repeated requests and demands, [Ds] have failed to render proper accounts and/or provide proper information regarding administration of [LWST] to the members, including but not limited to bank statements, tenancy agreements and documents relating to the income and expenditure of the Tong.

PARTICULARS

(a) By a notice dated 23 December 2014 posted up on the notice board at various locations of Po Sheung Tsuen where [Ds] lived, [P1] as a member of [LWST] requested [Ds] to provide copies of all tenancy agreements, bank statements and documents relating to the income and expenditure of [LWST] for the years of 2012, 2013 and 2014 for inspection during the meeting of [LWST] to be held on 31 December 2014.

(b) During the meeting of [LWST] held on 31 December 2014, [Ds] only provided some tenancy agreements in respect of properties in Po Sheung Tsuen for inspection while tenancy agreements in respect of properties in Shek Wo Hui and other documents including bank statements and documents relating to the income and expenditure of [LWST] were not made available for inspection.

(c) By a notice dated 28 March 2015 posted up on notice board at various locations in Po Sheung Tsuen where [Ds] lived, [P1] put on record that [Ds] did not make available all documents requested for inspection during the last meeting and demanded [Ds] to provide all documents requested for inspection in the meeting of [LWST] to be held on 5 April 2015.

(d) During the meeting held on 5 April 2015, [Ds] failed and/or refused to comply with the requests and demands made in the notice dated 28 March 2015.

(e) By a notice dated 22 December 2016 posted up on notice board at various locations of Po Sheung Tsuen where [Ds] lived, [P1] requested and demanded [Ds] to provide copies of all tenancy agreements, bank statements, documents relating to the income and expenditure of [LWST] and records relating to sale and purchase of stocks for the years 2012, 2013, 2014, 2015 and 2016 for inspection during the meeting to be held on 31 December 2016.

(f) During the meeting of [LWST] held on 31 December 2016, [Ds] only produced some bank books for inspection.

(g) By a letter dated 16 February 2015 from [WH], Solicitors for [P1 and P2] to [D1], [WH] requested for copies of all tenancy agreements in respect of the 2^nd Property and the 3^rd Property for the years 2012, 2013 and 2014.

(h) [D1] did not at the time comply with the requests and demands made by [WH] in its letter dated 16 February 2015.

(i) By 2 letters dated 13 February 2017 from [WH], Solicitors for [P1 and P2] separately addressed to [D1] and [D2] respectively, [WH] requested each of them to produce all tenancy agreements, bank statements and documents relating to the income and expenditure of [LWST] for the years from 2012 to 2016 within 14 days.

(j)  None of [Ds] fully complied with the requests and demands made by [WH] in its letter dated 13 February 2017.”

15.Thus, what was pleaded was merely a series of requests and demands for production of various kinds of documents which were not complied with fully or at all by Ds.

16.It is not in dispute that as members of LWST, P1 and P2 are not entitled to an order compelling the managers to produce documents of LWST in Ds’ possession as sought by them.  Whether disclosure would be ordered is an exercise of discretion by the court as part of its inherent jurisdiction to supervise the administration of the tong, and the court has to consider carefully in what way this discretion should be exercised, see by analogy Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at §67 and other authorities cited by the judge at §§142 and 143 of the Judgment[31].

17.As the judge put it at §146, at the very least, P1 and P2 would have to show (1) what are the documents sought, with particulars; (2) the objective(s) of P1 and P2 in requesting for the documents; and (3) the disclosure sought would be beneficial to the administration of LWST.

18.Mr Chau renewed his request for documents on appeal in these terms:

(1) Within 60 days, D1 and D2 deliver to P1 and P2 all bank statements, tenancy agreements, and documents relating to the income and expenditure, from 18 July 1977 (ie the date on which D2 became manager of LWST) to the date of this order, of LWST for inspection[32];

(2) Alternatively, within 60 days, D1 and D2 deliver to P1 and P2 all bank statements, tenancy agreements, and documents relating to the income and expenditure, from 2012 to 2016 (inclusive) of LWST for inspection.

19.The judge has reviewed the evidence relating to Ps’ requests for documents and the disclosure by Ds before and after the commencement of these proceedings at §§132 to 135 of the Judgment.  He noted Mr Chau’s complaints that Ds have not produced the underlying documents substantiating individual items of income and expenditure, and that some of the deposits and withdrawals relating to LWST went through the treasurers’ personal bank accounts, which have not been produced.  He could not find sufficient material facts in the pleadings or in the evidence for him to exercise his discretion ordering such a wide range of disclosure.

20.Mr Chau contended it is not necessary to plead the bases justifying an order for disclosure in the statement of claim.  He cited cases to show that beneficiaries of a trust could apply to court for production of documents by originating summons under Order 85 of the RHC[33], in which instance no pleading would be required.  He argued that if an application can be made by originating summons, it follows that there cannot be a rule that justification for production of documents must be pleaded.

21.We think this is missing the point.  Irrespective of how the proceedings are commenced, whether by writ or by originating summons, the applicant must place before the court sufficient information or materials for it to consider how to exercise its discretion, in particular, the matters referred to by the judge at §146.  The judge held that P1 and P2 have failed to discharge their burden in this regard.  We are inclined to agree with him.

22.Mr Chau argued that P1 and P2 should “prima facie be entitled” to inspect documents in order to verify the financial position of LWST as asserted by Ds[34]. We do not think the authorities cited would support the wide proposition that he made.  We reject also any contention that managers should as a rule account for the period in which they were in office, notwithstanding the examples given by Mr Chau[35].

23.This application was made in the context of an action in which Ps had made allegations and complaints with regard to the affairs of LWST and, in the course of this action, discovery was made by Ds in respect of five specific claims, apart from the claim for production of documents.  There is nothing to indicate that discovery in respect of the five specific claims was incomplete or inadequate.

24.We see no basis whatsoever to interfere with the judge’s exercise of discretion in refusing to order production of documents as sought.  We dismiss the appeal of P1 and P2 regarding this claim.

Ding Payments Claim[36]

25.The case of P1, P2, P4, and P5 regarding Ding Payments was pleaded as follows in RASOC:

“29. From 1992 to 1997 (inclusive) and from 2003 onwards, the custom and practice of the heads of the 5 Fongs and members of their Fongs was that [D1] - in his capacity as Agent/Trustee/Helper - would collect from Liu Sam Chuk Tso (廖三祝祖) all annual payments to which members of the 5 Fongs were entitled for distribution among the heads of the 5 Fongs (who were entitled to receive the distribution on behalf of themselves and members of their respective Fongs).

30. In accordance with tradition and custom, on an annual basis, if Liu Sam Chuk Tso has surplus money after deducting the expenses from the rents received, 70% of such surplus money would be distributed, as ‘Ding payments’ (‘丁口錢’) (‘Ding Payments’), equally among all members of [LSCT], irrespective of which family they belonged to.

31. [P1, P2, P4, and P5] were at all material times entitled to receive Ding Payments from [LSCT].

32. It was also the custom that a head of a Fong would be entitled to receive Ding Payments on his own behalf as well as on behalf of their sons and/or grandsons.

33. Any Ding Payments received by [D1] on behalf of [P1, P2, P4, and P5] were at all material times and are held by [D1], by virtue of his role as Agent/Helper/Trustee, as a trustee of [P1, P2, P4, and P5] respectively.

PARTICULARS

(a) Paragraphs 29 and 32 hereof are repeated;

(b) Any Ding Payments received by [D1] from [LSCT] were at all material times and are intended for [P1, P2, P4, and P5].

(c)  [D1] was at all material times and is obliged to transfer any Ding Payments received by him to [P1, P2, P4 and P5].”

26.The relevant documentary evidence regarding Ding Payments was summarised in the tables set out in §84 of the Judgment.  Ding Payments were shown only in some years in the accounts prepared by D1.  The judge took the view it is more likely than not that in the years Ding Payments were not shown in the relevant accounts, Ding Payments had in fact not been distributed by D1 to the fong concerned[37].

27.Regarding Ding Payments to P1’s fong, D1 testified he had withheld Ding Payments to P1 for 2010 and probably in other years as well as they were in litigation but claimed that the Ding Payments issue between them had since been settled (“Alleged Settlement”)[38]. However, as the Alleged Settlement was not pleaded in the re-amended defence, it was held that D1 should be held to his pleadings and not be allowed to rely on the Alleged Settlement as a defence to P1’s claim[39].

28.Notwithstanding his findings on the facts, the judge did not rule in favour of Ps on the Ding Payments Claim.  This is because he took the view that Ps had failed to plead a proper legal basis upon which they could hold D1 liable in respect of the Ding Payments.  Nor did he think Ps could derive assistance from the principle that a gratuitous agent may be held liable to the principal in some circumstances, as it has not been pleaded in RASOC: (a) what degree of care is reasonably expected of D1 in the circumstances; (b) what are the relevant circumstances; and (c) in what way D1 has failed to exercise such degree of care[40]. With the absence of all these matters in the pleadings, the judge held that the principle of gratuitous agent would have no application in this instance, and, for this reason alone, the claim for Ding Payments based on the alleged role of D1 as “Agent/Trustee/Helper” must fail[41]. He further reasoned that if P1 and P2 should be allowed to rely on a basis not spelt out in their pleadings to recover the Ding Payments, D1 should also be allowed to rely on the unpleaded Alleged Settlement as a defence to P1’s claim. He did not consider it fair to resolve these unpleaded issues when there had been no discovery and the parties had not been given opportunity to adduce evidence on them[42].

29.We disagree with the judge on the inadequacy of pleadings of a proper legal basis for the Ding Payments Claim.

30.It seems to us that the judge has read too much into the statement quoted in Bowstead & Reynolds on Agency.  As rightly submitted by Mr Chau, a gratuitous agent still has a duty to account for monies received[43]. It has been pleaded in RASOC that D1 collected Ding Payments from LSCT for distribution to the five fongs and was obliged to transfer the Ding Payments he received which were intended for P1, P2, P4 and P5 to these plaintiffs.  In the present context, this must be adequate pleading.  We do not see the need to plead the degree of care reasonably expected of D1 and in what way D1 failed to exercise reasonable care.

31.In the prayer for relief in RASOC, P1, P2, P4 and P5 claimed against D1:

(1) an account and/or inquiry as to the Ding Payments for 1992 to 1997 and 2003 to 2011 from LSCT collected by D1 on behalf of P1 and/or P4;

(2) an account and/or inquiry as to the Ding Payments for 2007 to 2012 and 2017 from LSCT collected by D1 on behalf of P2 and/or P5; and

(3) payment to P1, P2, P4 and P5 of the sums found due on the taking of the accounts and/or inquiries.

32.Under section 4(2) of the Limitation Ordinance, an action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.  Mr Chau submitted that notwithstanding much of the period for which accounts and/or inquiries are to be taken was more than six years from the commencement of this action in April 2017, the orders sought would not be subject to time bar for these reasons.  Firstly, a claim of an account simpliciter based on a fiduciary relationship is not barred by any period of limitation[44]. Further or alternatively, the Ding Payments would be held by D1 as trust monies, in D1’s possession or previously received and converted to his use.  Hence, section 20(1)(b) of the Limitation Ordinance[45] would apply[46].

33.We do not accept his submissions that no period of limitation should apply in this situation.

34.The claim for taking accounts and/or inquiries is not advancing a claim of an account simpliciter.  The prayer also sought payment of the sums found due on the taking of the accounts and/or inquiries.  A similar argument was raised in Hui Chun Ping v Hui Kau Mo (2024) 27 HKCFAR 634 to disapply the limitation period and was rejected.  As stated by Lord Hoffmann NPJ in Hui Chun Ping v Hui Kau Mo (2024) 27 HKCFAR 634 at §38: “The taking of an account, even if not expressly declared to be subject to its own limitation period, must be ancillary to some claim for whatever sum the account shows to be due.  If such a claim is barred by limitation, there is no point in taking an account.”

35.Nor do we think the Ding Payments would be held by D1 as trust monies and thus fall within section 20(1)(b).  Nelson v Rye was explained by Millett LJ in Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400, in which he pointed out that the defendant’s liability to account for more than six years before the issue of the writ in Nelson v Rye depended on whether he was, not merely a fiduciary (for every agent owes fiduciary duties to his principal), but a trustee owing fiduciary duties “in relation to the money”.  He went on to say at 416b to d:

“… It would appear that the defendant was entitled to pay receipts into his own account, mix them with his own money, use them for his own cash flow, deduct his own commission, and account for the balance to the plaintiff only at the end of the year.  It is fundamental to the existence of a trust that the trustee is bound to keep the trust property separate from his own and apply it exclusively for the benefit of his beneficiary.  Any right on the part of the defendant to mix the money which he received with his own and use it for his own cash flow would be inconsistent with the existence of a trust.  … The fact that the defendant was a fiduciary was irrelevant if he had no fiduciary or trust obligations in regard to the money.”

36.In Bailey & Anr v Angove’s Pty Ltd [2016] UKSC 47, Lord Sumption said at §19:

“An agent has a duty to account to his principal for money received on his behalf.  It is, however, well established that the duty does not necessarily give rise to a trust of the money in the agent’s hands.  That depends on the intentions of the parties derived from the contract, or in some cases from their conduct.  As a broad generalisation, the relations between principal and agent must be such that the agent was not at liberty to treat as part of his general assets money for which he was accountable to his principal.  This will usually, but not invariably, involve segregating it from his own money.  …”

37.Mr Chau has not referred to any evidence showing that the Ding Payments D1 collected from LSCT for distribution to the five fongs were segregated from D1’s own money or mixed with his own money.  There is no evidence to support his contention that D1 owed fiduciary duties in relation to the money collected, and no support for the contention that section 20(1)(b) would apply to the Ding Payments collected.

38.We hold that section 4(2) applies to bar any claim for an account prior to 20 April 2011.

39.Subject to clarification as to whether Ding Payments for 2011 were collected by D1 on behalf of P1 and/or P4 before or after 20 April 2011, it may be that the entire claim of P1 and P4 for an account and/or inquiry would be time-barred.  In the event that an account is to be taken for 2011, D1 should be permitted to raise the Alleged Settlement in the taking of the account.

40.As for P2 and P5, their claim for an account and/or inquiry as from 20 April 2011 to 2012 and in respect of 2017 is allowed.

41.To the extent as indicated above, we allow the appeal against the dismissal of the Ding Payments Claim.

Failure to Pay Rates Claim[47]

42.This claim was brought by P1 and P2 and was pleaded in §41 of RASOC:

“1^st and/or 2^nd Defendant’s Failure to Pay Rates

41. In breach of their duties mentioned in paragraph 21(a) and/or (b)[48] hereof, [Ds] failed to pay rates in respect of various landed properties of [LWST] when they fell due, wrongfully reimbursed themselves, and thereby caused [LWST] and its members to suffer loss and damage.

PARTICULARS

(a) Due to [Ds’] failure to pay rates in respect of various landed properties of [LWST] for various periods upon demand, the Government commenced legal proceedings DCMP 2417 of 2006 and DCMP 614 of 2013 and obtained judgments against [Ds].

(b) As to DCMP 2417 of 2006, [Ds] were liable for the judgment debt (i.e. the outstanding rates) of $57,392.60, in addition to court costs of $1,210, interest of $33,835.91, and costs and interest in respect of a charging order of $9,527.46.

(c) As to DCMP 614 of 2013, [Ds] were liable for the judgment debt (i.e. the outstanding rates) of $56,222.90, in addition to court costs of $1,270, interest of $35,858.60, and costs and interest in respect of a charging order of $7,723.07.

(d) The total amount of court costs and interest resulting from the proceedings is calculated as follows:

$1,270 + $33,835.91 + $9,527.46 + $1,270 + $35,858.60 + $7,723.07 = $89,425.04

(e) The said sum of $89,425.04 was the loss caused by the failure of [Ds] to discharge their duties as managers and should not therefore be deducted from the income of the Tong which its members are entitled to.

(f)  The 2013 and 2016 accounting statements of [LWST] record that [Ds] have wrongfully deducted sums of HK$1,667, HK$111,450 and HK$99,408 from [LWST] funds, in relation to DCMP 2417 of 2006 and DCMP 614 of 2013. However, the precise basis and amount of the deductions is not clear from such accounting statements.”

43.If P1 and P2 were to succeed on this claim, it is their case that the amount Ds ought to pay to each of them would be HK$4,471.25, being their 1/20 share of HK$89,425.04.  For this claim of less than HK$10,000 in total, Mr Chau devoted five pages of his submissions plus an annex of nearly three pages, raising a number of legal contentions.

44.Ds denied they are liable in respect of the failure to pay rates and pleaded this in the re-amended defence:

“44. As to paragraph 41, it is averred that:-

(a) At the material time, there was a widespread and concerted movement among indigenous villagers to fight for rates exemption after 1997 in order to protect their lawful and traditional rights and interests.

(b) In meetings of members of [LWST], it was agreed by members to withhold payment of rates pending negotiation with the Government which if successful would bring long term benefit to indigenous villagers as a whole and to members of [LWST] in particular.

(c) [TK], the treasurer engaged lawyers to negotiate with the Government.  The negotiation with the Government failed in the end.  The Government claimed against [LWST] for payment of outstanding rates by legal action.

(d) In a special meeting of members of [LWST] held on 20th May 2017, members agreed, inter alia, that the legal costs incurred in DCMP 2417/2016 and DCMP 614/2013 and fines imposed by Government in relation to late payment of rate should be paid by [LWST].

(e) The annual general meeting of [LWST] is held on the 31^st December each year. Interested members can attend the annual general meeting.  Members who attend the meeting will also look after the interest of their own fongs.

(f) In the annual general meeting of [LWST] held on 31^st December 2018, members agreed, inter alia, that the legal costs incurred in legal action and fines imposed by Government in relation to late payment of rates should be paid by [LWST].

(g) In the premises, the postponement of payment of rates was at the material time agreed or alternatively subsequently ratified by members of [LWST].

(h)  Save as aforesaid, paragraph 41 is denied.”

45.In Ds’ further and better particulars, it was pleaded that members of LWST agreed that LWST should pay for the interest and/or costs in relation to the failure to pay rates, in meetings held on 31 December 2013, 31 December 2016, 20 May 2017 and 31 December 2018 (ie the Rates Resolutions as defined earlier).

46.As mentioned, the judge dismissed this claim on two broad grounds.

47.Firstly, he rejected Ps’ challenge to the validity of the Rates Resolutions which was made on three bases: (1) the resolutions were not passed by unanimous consent of all members of LWST; (2) there was no notice to all members of LWST informing them of the proposed resolution before each meeting; and (3) there was no voting or agreement in each of the meetings in respect of the resolutions.

48.The judge rejected the challenges on validity for these reasons:

(1) If Ds have to return the payments authorised by the Rates Resolution, the whole sum should be returned to LWST.  Under Order 15 rule 4(2), where the plaintiff claims any relief to which any other person is entitled jointly with him, all persons so entitled must, subject to the provisions of any written law and unless the court gives leave to the contrary, be parties to the action, and those who do not consent to join as plaintiff must be made defendant.  Ps have not complied with this mandatory requirement and made all the members of LWST parties in these proceedings, nor have they brought representative proceedings following the procedure in Order 15 rule 12[49];

(2) Although an irregularity (ie non-compliance with Order 15 rule 4(2)) without more would not be sufficient for defeating Ps’ claims, the judge did not think it just and fair to entertain Ps’ challenges against the Rates Resolutions in this instance.  He reasoned that if the majority of the members were not in support of Ps’ stance on the Rates Resolutions, by operation of the “irregularity principle” at common law, the Rates Resolutions would be regarded as valid notwithstanding Ps’ complaints.  He was unable to accept Mr Chau’s proposition that the irregularity principle would not apply and the validity of the Rates Resolutions should be governed by Chinese law and custom, according to which (as contended by Mr Chau) the resolutions could not be valid in the absence of notice of the proposed resolution to all the members of LWST.  Unlike the case cited by Mr Chau concerning a business tong[50], there was no expert evidence concerning the Chinese law and custom governing the operation of a family tong in this regard.  In the absence of any pleading and any expert evidence[51], the judge did not think it appropriate to hold that in determining the validity of a resolution, the irregularity principle had been displaced by Chinese law and custom[52];

(3) Mr Chau had submitted that the Rates Resolutions must be passed by unanimous consent of all the members of LWST because the payments authorised by these resolutions would be from the capital and not from the income[53].  The judge held he was not entitled to take this point because it has not been raised in the pleadings[54] and it would not be fair to allow Ps to raise this because it involved facts and law.  Further, it is inconsistent with Ps’ own case that they would be entitled to 1/20 of the money that should be returned by Ds to LWST[55].

49.Secondly, the judge held that Ds have not failed to discharge their duties as managers of LWST in this matter[56]. In other words, there was no breach of the duties mentioned in §§21(a) and (b) of RASOC (see footnote 48).  The judge accepted D1’s evidence concerning the widespread and concerted movement of indigenous villagers to fight for rates exemption in 1994 and the tactics they adopted of withholding payment of rates when they negotiated with the government.  He also accepted D1’s evidence on the passing of the Rates Resolutions[57]. He took into account the background, that Ds were acting in accordance with the consensus of the village elders and village representatives in Sheung Shui Wai at the material time, and that Ds’ acts were approved by the members of LWST in four meetings in 2013, 2016, 2017 and 2018, and concluded that Ds have not failed to discharge their duties and it would not be just and fair to require them to bear personal liabilities in respect of the failure to pay rates in those circumstances.

50.To overturn the dismissal of Ps’ claims, Ps would need to establish that the judge was wrong on both broad grounds. 

51.Mr Chau directed his grounds of appeal (§§14 to 28) almost entirely to the first broad ground.  The only ground relating to the second broad ground is §26, in which he contended that the judge erred in law and in fact in holding that Ds did not fail to discharge their duties as managers of LWST because:

(1) As managers, Ds had a duty to pay rates for LWST properties;

(2) Ds should not be excused for knowingly acting against the law by failing to pay rates, even though supported by village elders, village representatives and/or some members of LWST; and

(3) There was no agreement by members of LWST as to the failure to pay rates in light of the challenges on the validity of the Rates Resolutions.

52.We do not accept the assertions made in the above submissions.  The duties of Ds, as pleaded in RASOC, are “to act in utmost good faith, fairly and openly, towards and in the best interests of all members alike as ultimate beneficiaries of [LWST]” and “to exercise reasonable care and skill in the administration, control and management of the properties of [LWST]”.  In light of the background and facts found by the judge, he is plainly right to hold that Ds have not failed to discharge their duties as managers of LWST in this matter.  There is no basis for the appeal court to interfere with his finding.

53.For this reason alone, the appeal against the Failure to Pay Rates Claim must be dismissed.

54.It is unnecessary for us to address the elaborate submissions made by Mr Chau regarding the first broad ground of the judge in dismissing this claim.  They are mostly a repetition of the arguments advanced before the judge.  We think it best not to express a view on them as we do not find it appropriate to extrapolate general propositions of law from the cases he cited[58], which must be read with regard to the factual and procedural context and this may not be apparent from the cases themselves for one reason or other.  We would only observe that none of the cases cited involved any discussion on the application of Order 15 rule 4(2).  We decline to express any view on the unanimous consent point and the application of the irregularity principle in this situation.

55.We make a further observation that insofar as the factual bases in support of Ps’ challenge to the Rates Resolution are concerned, they are premised on P1’s evidence.  The judge noted that P1 had no participation in the meetings and in the management of LWST, that many matters in his evidence are hearsay and would be of very limited assistance even if accepted[59], and that the recordings of the meetings made by P4 and the transcripts are deficient as some parts are inaudible and may not capture the entire meeting[60].

Invalid Authorisation of Legal Fees Claim[61]

56.This claim was brought by P1 and P2 and was pleaded in RASOC as follows:

“1^st and/or 2^nd Defendant’s Holding of Meeting to Purportedly Authorise Legal Fees

42. By a notice dated 13 May 2017 (‘the Notice’), [Ds], in their capacities as managers of [LWST], called for an extraordinary members’ meeting of [LWST] to be held on 20 May 2017 …

43. The agenda as stated in the Notice was limited to:

(a) The tenancy affairs of [LWST]; and

(b) Other matters.

44. In the 20.5.2017 Meeting, which was attended by some members of [LWST]:

(a) [Ds] stated that an action in the High Court (i.e. the present proceedings) was commenced because the 1^st and 2^nd Plaintiffs thought they suffered loss because the government fined [LWST], which was caused by the failure to pay rates, and wanted [LWST] to make compensation;

(b) [Ds] briefly mentioned the rental of the 2^nd Property (Front Portion) and the provision of accounting documents;

(c) [D1] indicated that solicitors’ fees and counsel’s fees had to be incurred for the action and asked members of [LWST] present at the 20.5.2017 Meeting to agree that [LWST] would pay legal costs;

(d) Members of [LWST] present at the 20.5.2017 Meeting were requested to sign a document authorizing [Ds] to engage lawyers to defend the action and incur legal costs;

(e) Some but not all members of [LWST] present at the 20.5.2017 Meeting signed such a document (‘the Purported Authorization Document’); and

(f) There was no mention that the action contains claims against [D1] in respect of his breach of duties as Agent/Trustee/Helper in the management of landed properties belonging to the 5 Fongs, which are wholly irrelevant to, and the associated legal costs thereof should not be borne by, [LWST].

45. There was never at any material time, whether by the Purported Authorization Document or otherwise, any valid authorization for any of [Ds’] legal fees, whether for this action or otherwise, to be paid out of or reimbursed from [LWST]’s funds (‘Valid Authorization’).

46. In particular, the Purported Authorization Document and/or the 20.5.2017 Meeting does not constitute any Valid Authorization:

(a) The agenda in the Notice fails to give any or any sufficient notice regarding authorization for any of [Ds’] legal fees, whether for this action or otherwise, to be paid out of or reimbursed from [LWST]’s funds.

(b) [Ds] did not make adequate disclosure of the matters in this action. Paragraphs 42-44 hereof are repeated.

(c) The members of [LWST] who did sign the Purported Authorization Document did not amount to even a majority, let alone an unanimity, of members, and therefore could not have provided Valid Authorization.

(d) [Ds] merely posted up the Notice on the notice board in the village without taking adequate steps to ensure that each and every member (including those residing outside Hong Kong) would become aware of the 20.5.2017 Meeting. [P1 and P2] did not receive any notice from [Ds] regarding the 20.5.2017 Meeting.

47.  Insofar as any of [Ds’] legal fees for this action or otherwise have been paid out of or reimbursed from [LWST]’s funds, such payment out or reimbursement is unauthorized and unlawful, and [Ds] are liable to make compensation.”

57.The judge rejected the matters pleaded in §46 to challenge the validity of the 2017 Resolution for these reasons[62]:

(1) Ps have not complied with Order 15 rule 4(2) and joined all the members of LWST as parties in these proceedings, nor have they brought representative proceedings pursuant to Order 15 rule 12;

(2) On a fair reading of §46, Ps have not raised the point that the 2017 Resolution required unanimous consent of all the members of LWST.  Ps should not be allowed to run the unanimous consent point;

(3) It is alleged in §46(c) that the 2017 Resolution was not signed by a majority.  However, as shown in the minutes, the 20.5.2017 Meeting was attended by 13 members.  Except for P4, the other 12 members all signed on the minutes indicating their agreement to the 2017 Resolution.  If Ps were putting forward a case that the 2017 Resolution had not been signed by a majority, they have not shown by evidence there was any other member who had disagreed;

(4) Ps have not pleaded that the ambit of the 2017 Resolution would not cover the legal costs incurred by D1 in respect of the matters concerning the Lot 415 Claim and the Ding Payments Claim.  It would not be necessary to rule whether the 2017 Resolution would cover such matters.

58.The 20.5.2017 Meeting was not an annual meeting but a meeting specially convened.  According to the notice dated 13 May 2017, which was posted on the notice board at various locations of Po Sheung Tsuen, the meeting was to discuss the issue of the rental affairs of LWST and “other businesses”.  On a number of occasions, P1 also gave notice to the managers of LWST of matters concerning the tong by posting a notice on the notice boards in the same way.  D1 gave evidence that the entire area where the notice boards were found was occupied by members of LWST, and that the members knew each other and would be telling each other when the meeting was to be held[63].

59.The record that was signed by 12 members indicating their agreement read as follows in English translation:

“Matters of discussion:

The two managers, Liu Wai Man and Liu Chee Kwan, have recently received a letter from Messrs Wong Hui and Co, Solicitors, acting for Liu Hon Wong and Liu Tse Wah, accusing the two managers of having faulted in the handling of rates issue of the Tong, being fined by the government pursuant to the law and claiming for damages.  [The letter] is also accusing the two managers of not meeting their requests regarding the rental affairs.

Since many meetings had been held in early years regarding the handling of the rates issue of the Tong [and] it was finally agreed to temporarily withhold payment to negotiate with the government department to fight for and seek exemption even though at last it ended in failure and fines were imposed.  But the responsibility was not with the two managers.  This meeting is to put to vote that the litigation fee [arising] from this should be borne by Liu Wing Sing Tong.

Agree”

60.When Mr Chau contended earlier that the judge was wrong to hold the irregularity principle at common law applied, he submitted in support of his contention that procedures for meetings and the passing of resolutions are governed by Chinese law and custom.  In seeking to challenge the validity of the 2017 Resolution on the grounds pleaded in §46 of RASOC, it would appear that he had relied on common law principles rather than Chinese law and custom.  This is inconsistent with his earlier stance and with the cases that he cited[64]. We agree with the established law that Chinese law and custom should apply to govern the procedures of meetings of an ancestral tong.

61.If we were mistaken on Mr Chau’s position and he is really relying on Chinese law and custom, he has not indicated what are the contents of the relevant Chinese law and custom and no expert evidence on Chinese law and custom was adduced regarding the procedure and requirements of ancestral tongs for holding meetings and the passing of resolutions.  Assuming there were no formal procedural rules governing the process of meetings for LWST, the reasonable basic requirements for this tong must be established by expert evidence.  For instance, it is not known if notice must be given to those members who are not reasonably expected to respond to the notification, particularly as many of the members have migrated overseas.  And if the head of a fong had migrated overseas, whether it would suffice to give notice to a member of the same fong. 

62.We agree also with the judge that the unanimous consent point has not been properly raised in §46(c) of RASOC and Ps should not be permitted to argue this point.

63.For the above reasons, Ps must fail in their challenge against the validity of the 2017 Resolution.  We reject the appeal of P1 and P2 against the dismissal of the Invalid Authorisation of Legal Fees Claim.

Lot 415 Claim[65]

64.This claim was brought by P1, P2 and P3, alleging that D1 acted in breach of his duties as “Agent/Trustee/Helper” as set out in §§19(a) and/or (b) of RASOC in that since about 2011, D1 allowed and suffered unlawful occupiers to occupy and use Lot 415 and illegally changed the user.  It was alleged that Ps had suffered loss and damage in these respects:

(1) D1 failed to take action against the unlawful occupiers.  P1 and P3 commenced legal proceedings to evict the unlawful occupiers in HCA 313/2014 and had thereby suffered loss and damage being the legal expenses incurred of HK$129,106.60[66];

(2) The government prosecuted D1 in 2012 as a result of the illegal change of user of Lot 415 which was agricultural land for industrial purpose.  HK$115,000 representing the fine[67] and legal fee was deducted from the income which the five fongs were entitled to[68];

(3) For 2014, expenses in the total sum of HK$665,850 relating to Lot 415 were incurred.  They consisted of fine (HK$360,000)[69], legal fee (HK$12,000), first phase work of 99 trucks, site operator and addition/mending fence (HK$44,550, HK$19,000 and HK$30,000 respectively) and second phase work of levelling site (HK$200,300).  As these expenses were caused by D1’s failure to discharge his duties, the amount of HK$665,850 should not have been deducted from the income which the five fongs were entitled to[70].

65.The alleged role of D1 as “Agent/Trustee/Helper” was pleaded in §14 of RASOC in this way:

“14. Since [Liu Hon Fan]’s death until 1992, the custom and practice of:

(a) all the heads of the 5 Fongs from time to time and the registered owners (or co-owners) from time to time of [Liu Hon Fan]’s land was that Liu Hon Yin[71] acted as an agent and trustee of the heads of the 5 Fongs and the registered owners (or co-owners) (a) managing all of [Liu Hon Fan]’s land, including but not limited to looking after the landed properties, leasing out the landed properties, and collecting rent and other incomes of the landed properties; and (b) annually, distributing any aggregate profits for that year (calculated by aggregating income and expenses for that year) arising from [Liu Hon Fan]’s land to the heads of the 5 Fongs with each head of Fong receiving a 1/5 share of such profits for the benefit of his Fong; and

(b)  all the heads of the 5 Fongs from time to time and members of their Fongs from time to time was that Liu Hon Yin acted as an agent and trustee collecting on behalf of and distributing to such heads of the 5 Fongs the shares of incomes from Tongs and Tsos which the heads of the 5 Fongs were entitled to receive on behalf of themselves and members of their Fongs.”

66.The duties of D1 as “Agent/Trustee/Helper” set out in §§19(a) and/or (b) of RASOC were as follows:

“(a) [to] exercise reasonable care and skill in the management of the properties he manages;

(b) [to] act in utmost good faith, fairly and openly, towards and in the best interests of the members of the 5 Fongs and/or the Registered Land Owners [of Lot 415]”.

67.D1’s pleaded case was that he was not responsible for the care and management of Lot 415 and he is merely a co-owner of this property.  He also claimed it was unnecessary for P1 and P3 to commence HCA 313/2014 to recover possession of Lot 415.

68.The judge dismissed the Lot 415 Claim for a number of reasons:

(1) He found on the evidence that as a “helper”, D1 is only required to take care of the 15 landed properties in the schedule annexed to the re-amended defence and not Lot 415.  He accepted D1’s evidence regarding a family meeting in 1992 (“1992 Family Meeting”) attended by four fongs and in which P1’s fong did not participate.  The question of who should be the “helper” after the death of Liu Hon Yin was discussed and it was agreed that D1, with his physical disabilities, would only need to manage buildings and not Lot 415 which is a large piece of agricultural land in a remote area.  Accordingly, the Lot 415 Claim cannot succeed[72];

(2) Ps have failed to plead any basis in support of the proposition that the obligations in §§14(a) and (b) of RASOC are legally enforceable.  The principle concerning gratuitous agent has no application, when it has not been pleaded: (a) what degree of care is reasonably expected of D1 in the circumstance; (b) what are the relevant circumstances; and (c) in what way D1 has failed to exercise such degree of care.  For this reason alone, the claims based on the alleged role of D1 as “Agent/Trustee/Helper” must fail[73];

(3) As for the claim for legal expenses incurred of $129,106.60, it was unnecessary for P1 and P3 to bring HCA 313/2014.  The judge found on the evidence that D1 had recovered possession of Lot 415 by December 2013 before P1 and P3 commenced that action.  And even if HCA 313/2014 were necessary, the legal costs incurred by P1 and P3 should be borne by all the co-owners, not by D1 personally[74];

(4) In respect of the claim for 1/5 of the sum of HK$780,850 (HK$115,000 + HK$665,850), Ps have not pleaded or proved material facts of what D1 had failed to do that caused the Unlawful Occupation Event, even assuming that looking after Lot 415 was part of D1’s obligation.  Such material facts would include: (a) what D1 had failed to do, causing the Unlawful Occupation Event; (b) whether the actions suggested by Ps could prevent the occurrence of the Unlawful Occupation Event; (c) whether it is reasonable to expect or require D1 to take the actions as suggested by Ps; (d) whether any costs would be incurred in taking those actions; and (e) had those actions been taken by D1 while he was the “Agent/Trustee/Helper”, what would be the total amount of costs incurred in taking the actions as suggested.  If the costs incurred would be more than HK$780,850, causation is not proved[75].

69.Mr Chau sought to challenge each of the above holdings.  He would need to succeed on each of the challenges for the dismissal of the Lot 415 Claim to be overturned in the entirety.

70.The challenge to the judge’s finding of fact in (1) has no prospect of success and this alone is sufficient to dispose of the appeal against the dismissal of this claim.  Mr Chau contended that the judge “entirely failed to grapple with the factors” stated in §§54 and 56 of the grounds of appeal, which mounted an attack against the judge’s acceptance of D1’s evidence on the 1992 Family Meeting and rejection of P1’s evidence concerning the letter of his solicitors WH dated 10 December 2013.  We fail to see in what way the judge has “entirely failed to grapple with” the evidence.  §54 complained of aspects of evidence that Mr Chau had addressed the judge but were rejected as mentioned in §74 of the Judgment, and asserted that the judge had failed to take into account or adequate account some of them and had given undue weight to others.  §56 sought to criticise the judge’s reasoning in §51 of the Judgment in not regarding P1 as a reliable witness due to his evidence on WH’s letter dated 10 December 2013.  This is in essence a re-run of his submissions before the judge, and is not a permissible use of the appellate process.  It is clear from §74 of the Judgment that the judge has considered Mr Chau’s criticisms and submissions on the evidence.  The judge is entitled to attach no weight to P1’s evidence.  It is well established and has been repeatedly emphasised in many cases that the evaluation and weighing of evidence is a matter for the primary judge.  There is plainly no basis for the appeal court to interfere.

71.We will deal with the other grounds of appeal succinctly.

72.Unlike the pleading concerning a gratuitous agent regarding the Ding Payments (which involved the simple and undisputed act of collecting the money from LSCT), on which we disagree with the judge, we think he is correct in holding in respect of this claim that the pleading is deficient on the alleged responsibility of D1 in managing Lot 415, on how D1 had failed to exercise the degree of care that might be reasonably expected of him in the circumstances, and how D1’s failure had caused the Unlawful Occupation Event.  The judge is also correct in holding that there was no evidence to establish causation for the claim for 1/5 of HK$780,850.

73.As for the finding of fact that possession of Lot 415 was recovered by December 2013 before P1 and P3 commenced HCA 313/2014, Mr Chau again complained that the judge “failed to grapple” with the evidence, which he recited in §§57 and 58 of the grounds of appeal, contending that the judge failed to take account or adequate account of certain matters.  The judge is entitled to accept the evidence of D1 and reject the evidence of P1 and Tse for the reasons he gave[76]. As we have stated, this is not a proper use of the appellate process.  There is no basis to interfere with the judge’s finding of fact.

Letting of Properties at Undervalue Claim[77]

74.This claim was brought by P1 and P2.  It was alleged that D1 and D2, as the managers of LWST, had let the three Properties at an undervalue.

75.Based on the evidence of D1, D2, TK and CF as accepted by the judge, he has found as follows[78]:

(1) The 1^st Property is agricultural land and had been let to the same tenant for over 40 years.  The tenant had paid rent continuously in the past and TK believed that the tenant would demolish all the structures on the land when he moved out;

(2) If any member of LWST was willing to pay a higher rental to rent the 1^st Property, LWST would evict the current tenant and let the property to that member at the rental proposed by him;

(3) As to the 2^nd and 3^rd Properties, after 2011, before leasing out these properties, CF would contact two or three estate agents in the vicinity to ascertain the market rentals.  The proposed rentals for new tenancies would be discussed in the annual meeting of LWST.  If any member was willing to rent a property at a higher rent, LWST would let the property to that member at the rent proposed by the member;

(4) As for the allegation in §40(d) of RASOC that at the annual meeting on 30 December 2013, a member Liu Tim Man had offered to rent the 2^nd Property (Front Portion) at HK$60,000 a month but D1 insisted on putting this property on the market at HK$50,000, the judge found that LWST had agreed to let this property to Liu Tim Man at HK$60,000 but Liu Tim Man eventually declined to take up a lease at that monthly rental.

76.The judge dismissed this claim because Ps have failed to plead matters relating to the causation issue and have failed to prove causation.  Ps have not pleaded what Ds had done or had failed to do and as a result of which LWST had suffered a loss.  They merely alleged that Ds had let the Properties at an undervalue, without addressing in the pleadings: (a) what Ds should have done to find out the market rentals of the Properties at the material times; (b) what costs would have been incurred by LWST had the steps in (a) been taken; and (c) taking those costs into account, whether the letting at undervalue as alleged has really caused loss to LWST.  Nor have Ps adduced evidence on the causation issue[79].

77.Mr Chau challenged the findings of fact in §150 of the Judgment as set out above.  Again, he contended that the judge “failed to grapple” with the inconsistencies and improbabilities in the evidence of Ds’ witnesses as submitted by him, and complained that the judge failed to take into account or adequate account certain matters as he had submitted.  The appellate process does not provide a platform for repeating arguments on the evidence which did not find favour with the primary judge.  The appeal court has no basis to interfere with the judge’s findings of fact where it cannot be shown that he is plainly wrong.

78.We uphold the judge in dismissing the claim due to Ps’ failure to plead and prove matters essential to establish the claim.  There is no error of law. 

Conclusion

79.For the above reasons, we allow the appeal in respect of the Ding Payments Claim to the extent as indicated.  The appeal against the rejection of the other five heads of claim is dismissed.

Costs

80.We make an order nisi there be no order as to costs for this appeal.

81.We decide to depart from the usual rule that the successful party should be awarded costs of the appeal or part of the costs to the extent of the success.  We are mindful that Ps have to bring an appeal for part of the Ding Payments Claim to be overturned.  We do so for these reasons.

82.Although Ps have succeeded to a limited extent on the Ding Payments Claim, we have upheld the judge on his dismissal of all the other claims.  The challenges against the judge’s findings of fact in some of the claims are not tenable.  The costs incurred in bringing this appeal would seem to be out of proportion with the importance of the subject matter and/or the amount at stake, a notable example of which is the Failure to Pay Rates Claim.  In exercising its discretion on costs, pursuant to Order 62 rule 5(1)(aa), the court is entitled to take into account the underlying objectives set out in Order 1A rule 1.  Two underlying objectives are relevant here: to promote a sense of reasonable proportion in the conduct of proceedings; and to ensure that the resources of the court are distributed fairly.  We think it is warranted in these circumstances to make no order as to the costs of this appeal.

Mr Ian Chau, instructed by Wong, Hui & Co, for the 1^st to 5^th Plaintiffs (Appellants)

Mr Francis Yip and Mr James Wong, instructed by Ko & Chow, for the 1^st Defendant (Respondent)