Tang Che Tai and Others v. Tang on Kwai and Others

HCA 331/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 331 OF 2002

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BETWEEN

(BY ORIGINAL ACTION)

AND BETWEEN

(BY COUNTERCLAIM)

______________________

Before : Deputy High Court Judge To in Chambers (Open to Public)

Date of Hearing : 7 November 2007

Date of Decision : 7 November 2007

Date of Reasons for Decision : 13 December 2007

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REASONS FOR DECISION

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INTRODUCTION

1.The Plaintiffs by original action are members of the 3^rd fong(房) of Tang Kwong Yu Tong (鄧光裕堂) (the “Tong”).  They brought an action against the four Defendants by original action who are managers (司理) of the Tong for, inter alia, breach of duty as managers and trustees of the Tong in causing distribution of the Tong’s money in the amount of $201,000 by way of pai-ji (派饑) or relief of poverty (the “2002 Pai-ji”) to two hundred and one of its members on 24 March 2002 against the objection of the Plaintiffs.  The Plaintiffs sought an order that the Defendants return the said sum of $201,000 with interest to the Tong and an injunction to restrain them from making further distribution of assets of the Tong in the absence of unanimous consent of all its members.  The action was discontinued against the 2^nd Defendant who had since passed away.  After a trial which extended over a period of two years, I delivered judgment on 13 April 2007 (the “Judgment”).  I found for the Plaintiffs and dismissed the Defendants’ counterclaim.  I ordered the Defendants to return the said sum of $201,000 to the Tong with interest and made a costs order nisi that the Defendants shall pay the Plaintiffs’ costs (the “Order”).  I declined granting the injunction order as there was no evidence that despite the Judgment in this case, the Defendants would attempt further distribution of the Tong’s asset without unanimous consent.

2.On 27 April 2007, the Defendants issued a summons seeking to vary the costs order nisi on the grounds that the Defendants took part in the proceedings in their capacity as co-managers and co-trustees of the Tong; that they had not been acting unreasonably or for their own benefit and that there were matters in dispute between the Plaintiffs and the other fongs which required adjudication of the Court.  The Defendants changed their solicitors on 3 May 2007 and again on 9 May 2007 when the summons to review my costs order nisi was withdrawn by consent.  On 17 May 2007, the Defendants filed their notice of appeal, Appeal No CACV 137/2007 (the “Appeal”).  The Appeal will be heard in January 2008.  In the meantime, a charging order absolute in the sum of $201,000 was obtained against the property of one of the Defendants on 30 July 2007.  However, the Plaintiffs undertook not to enforce the charging order until the conclusion of the Appeal.

3.Then on 11 August 2007, the Defendants issued a notice of members’ meeting to be held on 26 August 2007 (the “Meeting”) for the purpose of passing the following three resolutions (the “Resolutions”): -

(a)	to approve the legal expenses incurred by the 1st, 3rd and 4th Defendants in this action be paid out of the funds of the Tong;
(b)	to approve the managers to use the funds of the Tong to pay for legal expenses in respect of the Appeal; and
(c)	to ratify the decision of the Defendants in distributing $201,000 to two hundred and one members of the Tong on 24 March 2002.

4.Having failed to reach agreement with the Defendants’ solicitors for the withdrawal of the notice of meeting, the Plaintiffs’ solicitors issued a summons on 21 August 2007 (the “Summons”) pursuant to Order 29, rule 1 of the Rules of the High Court (the “RHC”), seeking an interlocutory injunction that the Defendants shall:

(a)	be restrained from holding any meeting of the members of the Tong or from causing or otherwise passing the Resolutions until disposal of the Appeal;
(b)	be restrained from implementing any of the Resolutions until disposal of the Appeal or further order of the Court;
(c)	cause the Meeting of the members to be cancelled;
(d)	cause the notice of meeting to be withdrawn; and
(e)	be appointed to represent all and each member of the Tong other than members of the 3rd fong for the purpose of the orders to be made herein.

5.The Summons was heard on 23 August 2007.  I did not find it appropriate to grant any interlocutory injunction, albeit interim, which has the effect of restraining members of the Tong who are non parties to this litigation from attending meetings of the Tong.  I adjourned the Summons for argument and granted an interim injunction restraining the Defendants from carrying out or giving effect to the Resolutions, if passed, until the hearing of the Appeal or the adjourned hearing of the Summons whichever the earlier.  I also gave directions for filing of affidavits.  The Summons was re-fixed for hearing on 7 November 2007.

6.The Meeting was held on 26 August 2007 and the Resolutions were allegedly passed despite objection from the Plaintiffs and a few members of the other fongs.  At the time of the adjourned hearing of the Summons, the only live issue is whether the interim injunction I ordered on 23 August 2007 should be continued until the disposal of the Appeal.  Mr Ho SC, counsel for the Plaintiffs, confirms that the Plaintiffs will not pursue relief (e) of the Summons which was no longer necessary.  Thus, all the other relief sought on behalf of the Plaintiffs are academic.  Mr Chong, counsel for the Defendants, confirms that the Defendants will not carry out Resolution (c) but would resist the Plaintiffs’ application to restrain them from carrying out Resolutions (a) and (b).  

7.The Plaintiffs’ application for interlocutory injunction is made under Order 29, rule 1 of the RHC, i.e. by a party to a cause or matter before or after trial of the matter.  The Defendants’ principal ground of objection is that the court has no jurisdiction to grant post-judgment injunctive relief except for the purpose of enforcing judgment and that there was no infringement or threat of infringement to the Plaintiffs’ rights.  Their fall back position is that the Resolutions, if passed, do not have the effect of pre-empting the Appeal and the court should not restrain members of the Tong in the lawful exercise of their rights as members and to apply to court for relief under, inter alia, section 56 of the Trustee Ordinance and Order 85 of the RHC.

8.The issues raised by the Summons are: firstly, whether the court has jurisdiction to grant post-judgment injunction for purposes other than enforcing judgment; and secondly, if it has, whether such jurisdiction should be exercised in all the circumstances of this case including in particular the objections raised by the Defendants.

The Judgment by the original action

9.Before turning to counsels’ argument, it would be useful to re-visit the issues raised and decided in the original action.  I have set out the facts of the case in paragraphs 10 to 29 of the Judgment.  The claims of the Plaintiffs and the defence and counterclaims of the Defendants are summarised in paragraphs 1 and 2 of the Judgment as follows:

“	1.	This is an action brought by members of the 3rd fong (房) of Tang Kwong Yu Tong (鄧光裕堂) (the “Tong”), which is an ancestral t’ong (堂) situated in Kam Tin in the New Territories, against four managers (司理) of the Tong for, inter alia, breach of duty as managers and trustees of the Tong in causing distribution of the Tong’s money in the amount of $201,000 by way of pai-ji (派饑) or “relief of poverty” (the “2002 Pai-ji”) to two hundred and one of its members on 24 March 2002 against the objection of the Plaintiffs.  The Plaintiffs seek an order that the Defendants return the said sum of $201,000 with interest to the Tong and an injunction to restrain them from making further distribution of assets of the Tong in the absence of unanimous consent of all its members.
	2.	By counterclaim, the four Defendants claim against the 1st Plaintiff for breach of duty as a manager of the Tong and against the 1st, 2nd and 3rd Plaintiffs and two others members of the 3rd fong for breach of an agreement entered into at a meeting of the Tong on 7 February 1982 (the “1982 Agreement”).  They seek: (1) a declaration that certain land resumption compensation monies amounting to about $73.4 million in the bank accounts of the Tong be distributed amongst the members of the Tong in accordance with the 1982 Agreement; (2) an order against the 1st Plaintiff, who is also a manager of the Tong, to cause the distribution of the compensation monies forthwith accordingly; (3) damages for breach of duty and for breach of the 1982 Agreement and (4) damages for the late payment of surveyor’s fees (“Fotton’s fees”) incurred in connection with negotiation with the Government for compensation for the resumption of the Tong’s land caused by the 1st Plaintiff.”

10.The Plaintiffs’ claim is based on the unlawfulness of the 2002 Pai-ji.  The Defendants’ counterclaim is based on the lawfulness of the 1982 Agreement.  The subject matters of the 1982 Agreement and the 2002 Pai-ji are the Tong’s assets which are impressed with trust for the members of the Tong.  As the subject matters had their origin in land in the New Territories, Chinese custom or customary right affecting such land are applicable under section 13(1) of the New Territories Ordinance, Cap 97 (“NTO”).  I reviewed the authorities and considered the expert evidence of both parties.  I summarised the applicable principles of Chinese customary law in paragraph 72 of the Judgment as follows:

“	72.	In summary, I find that the following are the principles of Chinese customary law which may be applicable to the present case:
		(1)	t’ong property is meant to be indivisible, inalienable and perpetual;
		(2)	t’ong land may not be disposed of except under circumstances of necessity and by unanimous consent of all members of the t’ong, no single member may compel partition or sale of t’ong land;
		(3)	likewise, compensation from compulsory acquisition of t’ong land may not be distributed among members of the t’ong except under circumstances of necessity and by unanimous consent of all members, no single member may compel distribution of compensation;
		(4)	distribution of surplus rental income or profit issuing out of t’ong land for the purpose of  pai-ji is a matter of internal management of the t’ong and not a matter subject to Chinese customary law, it is governed by rules, if any, or by custom of the t’ong, if there are none;
		(5)	a custom must be immemorial, certain in respect of its nature generally as well as in respect of the locality where it is applied and the persons whom it is alleged to affect;
		(6)	a custom must have obligatory force from within the custom itself which is derived from continued practice without interruption since its immemorial origin; and
		(7)	a custom may evolve with changing social, economical and political circumstances; a new custom has evolved or an old custom modified if the evolving custom has acquired the above characteristics; to have the force of a custom, an evolving custom must have at least had a substantially long period of existence and recognition, though not necessarily since time immemorial, so that the persons whom this new custom is alleged to affect would feel it an obligation to follow in preference to the old one.”

11.I found that the funds used for the 2002 Pai-ji were rental income or profit issuing out of land belonging to the Tong within the meaning of section 2 of the NTO.  I also found that the resumption compensation monies standing in the bank accounts of the Tong which the Defendants sought to distribute among the members of the Tong were mixed cash compensation and mesne profit issuing out of the land of the Tong.  Accordingly, I concluded that distribution of cash compensation was governed by Hong Kong law while distribution of mesne profit was governed by Chinese customary law.  Applying the appropriate system of law to those funds, I reached the following conclusion in paragraphs 142 to 147 of the Judgment:

“	142.	I reach the following conclusions in respect of the Plaintiffs’ claim in the original action.  As the funds used for the 2002 Pai-ji was rental income or profit issuing out of the land of Tang Kwong Yu Tong, it was land within the meaning of section 2 of the NTO.  Chinese custom and customary right is applicable to the 2002 Pai-ji under section 13(1) of the NTO.  Pai-ji is a matter of internal management of Tang Kwong Yu Tong and is not governed by Chinese customary law.  As the Tong has no written rules, pai-ji is a matter which is subject to the custom of the Tong.  The Plaintiffs have proved the custom that there shall be no pai-ji unless the unanimous consent of all members of the Tong has been obtained.  As the Plaintiffs had communicated their objection to the 2002 Pai-ji to the Defendants, the Defendants were in breach of their duty as managers and trustees of the Tong to cause the distribution.  Accordingly, the 1st, 3rd and 4th Defendants are jointly liable to return to the Tong the sum of $201,000 so distributed together with interest at judgment rate since 24 March 2002.  Assuming that the Plaintiffs had failed to prove the custom as they alleged, the Plaintiffs are also entitled to judgement.  This is because the burden was actually on the Defendants to prove the custom of distribution of surplus income as of course and the Defendants have failed to discharge that burden.  There is no evidence to suggest that despite my judgment in this case the Defendants would attempt further distribution of the Tong’s asset without unanimous consent.  Hence, I am not going to make the injunction order sought by the Plaintiffs.
	143.	My conclusion in respect of the Defendants’ action by counterclaim is as follows.  The subject matter of the 1982 Agreement is cash compensation and mesne profit held in the bank accounts of the Tong.  Mesne profit is land within the meaning of section 2 of the NTO, but not compensation.  Thus, section 13(1) of the NTO applies to the mesne profit in the bank accounts of the Tong but not to compensation.  The 1982 Agreement, insofar as it concerns distribution of compensation, is governed by Hong Kong law, whereas insofar as it concerns distribution of mesne profit, is governed by Chinese customary law.
	144.	Under Hong Kong law, the 1982 Agreement purported to affect the rights of a future member of the 3rd fong, namely, the 5th Plaintiff, who was not in existence at the time the agreement was entered into.  Hence, Tang Chik Lam, the head of the 3rd fong at the time, could not have authority to enter into any agreement binding on the 5th Plaintiff.  The 1982 Agreement is therefore unenforceable.  Furthermore, the 1982 Agreement was voidable as having been obtained as a result of duress and has been effectively avoided by Tang Chik Lam on 6 November 1998.  The Defendants have no legal basis under Hong Kong law to demand distribution of the compensation in the bank accounts of the Tong.
	145.	Insofar as the 1982 Agreement concerns distribution of mesne profit, the Court shall have power to recognize Chinese custom and customary right affecting such mesne profit.  Under Chinese customary law, the 1982 Agreement would be unlawful as it seeks to appropriate the Tong’s asset to the present generation in the absence of any circumstances of necessity which is a condition precedent to the disposition of property of that nature under Chinese customary law.  The 1982 Agreement is also unenforceable as being contrary to public policy for the following reasons.  It is unlawful.  It violates the purpose of the Tong and is destructive of the Tong.  It would rob the future generations of their right to the asset of the Tong.  It was also voidable as having been obtained by duress and has been effectively avoided by Tang Chik Lam on 6 November 1998.  The Defendants have no legal basis under Chinese customary law to demand distribution of the mesne profit in the bank accounts of the Tong.
	146.	For the above reasons, the Defendants have no right or interest under the 1982 Agreement under Hong Kong law or under Chinese customary law to seek the declaration, order of distribution or damages they sought.  It is the 1st Plaintiff’s duty as manager of the Tong to prevent the unlawful distribution of the assets of the Tong.  Accordingly, the Defendants’ counterclaim is dismissed.
	147.	I also make an order nisi that the Defendants shall pay the Plaintiffs’ costs of this action with certificate for two counsel, to be taxed if not agreed.”

12.Three points should be noted from the above dicta.  Firstly, it should be noted that the central dispute between the Plaintiffs and the Defendants is whether the assets of the Tong may only be distributed by unanimous consent of the members of the Tong.  Chinese custom is applicable to the funds used in the 2002 Pai-ji, which are mesne profits, and unanimous consent for its distribution was required as a matter of custom.  Insofar as the distribution of the mense profits element of the funds standing in the bank accounts of the Tong pursuant to the 1982 Agreement is concerned, Chinese customary law is applicable.  That part of the 1982 Agreement is void for want of circumstances of necessity.  Insofar as the distribution of the cash compensation element of the funds pursuant to the 1982 Agreement is concerned, Hong Kong law is applicable.  That part of the 1982 Agreement was effectively avoided by Tang Chik Lam on 6 November 1998.  But as a matter of reality, there is nothing to prevent the parties from distributing any asset of the Tong, whether the cash compensation or mesne profit, by unanimous consent. 

13.Secondly, I found that the Defendants were in breach of fiduciary duty as managers and trustees of the Tong in causing the 2002 Pai-ji.  In addition to ordering the Defendants to repay the money so distributed to the Tong, I also ordered the Defendants to pay the Plaintiffs’ costs.

14.Thirdly, it should also be noted that one of the relief sought by the Plaintiffs was an interlocutory injunction to restrain the Defendants from making further distribution of assets of the Tong in the absence of unanimous consent of all its members.  Of particular relevance to the present application is that I refrained from granting any injunction order on my then apprehension that there was no evidence to suggest that despite the Judgment the Defendants would attempt further distribution of the Tong’s asset without unanimous consent (see paragraph 142 of the Judgment).  My apprehension was obviously wrong.

15.With the above observations, I now turn to consider the two issues raised by the Summons.

First Issue : Jurisdiction to grant post-judgment injunction

16.The Defendants’ position, according to Mr Chong, is that they have not applied for and are not seeking a Beddoe order to have their costs in the original action indemnified by the Tong.  They claim that they have a right, independently of the sanction of the Court, to seek a third party to pay their costs and this third party is the Tong to whom they render their services as trustee and managers.  Mr Chong confirms that the Defendants will not enforce Resolution (c), i.e. to ratify the distribution of the 2002 Pai-ji,but will carry out Resolutions (a) and (b) to pay the Defendants’ costs in the original action and in the Appeal.  He submits that when considering the Plaintiffs’ application, I should disregard the merit or de-merit of the Plaintiffs’ application but just concentrate solely on the Order that I made, i.e. that the Defendants shall pay the Plaintiffs’ costs.  He emphasises that no injunctive relief has been granted to the Plaintiffs in the original action.

17.In the light of the Defendants’ position, Mr Chong advances his legal proposition that if no injunctive relief was granted after the conclusion of an action, the court’s ambit of granting post-judgment injunctive relief would be confined to matters relating to enforcement of the judgment.  He says that such injunctive relief between final judgment and enforcement would be considered as interlocutory.  He submits that the classic case of such post-judgment injunctive relief is a Mareva injunction to prevent a judgment debtor from disposing of his property to avoid enforcement of judgment and that any other kinds of post-judgment injunctive relief is unheard of.

18.Mr Chong quotes the case of Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd 1 WLR 1097 as authority in support of the above proposition.  The plaintiff in that case obtained judgment against the defendant and then applied for a Mareva injunction restraining the defendant from disposing of its assets.  I am quoting extensively from the judgment of Farquharson J, as it is a short one and is heavily relied on by Mr Chong.  In granting the injunction, Farquharson J said at 1098:

“	Applications for Mareva injunctions have been made in increasing volume in recent years to protect a plaintiff at the outset of proceedings by freezing the assets of the defendant until judgment is given.  There is no reported case where an order has been made granting an injunction of this kind after final judgment in an action.  …
	The powers of the High Court to grant injunctions are set out in section 37 of the Supreme Court Act 1981:
	“	(1)	The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.  …  (3)  The power of the High Court under subsection (1) to grant an interlocutory injunction restraining a party to any proceedings from removing from the jurisdiction of the High Court, or otherwise dealing with assets located within that jurisdiction shall be exercisable in cases where that party is, as well as in cases where he is not, domiciled, resident or present within that jurisdiction.”
	Mr Engelman on behalf of the plaintiff submits that “interlocutory” in subsection (3) does not mean “until final judgment” but also relates to orders of the court thereafter.  He fortifies this submission by pointing to section 49 of the same Act which describes the general powers of the court.  Subsection (2) provides, in so far as it is relevant:
	“	Every … court shall give the same effect as hitherto … to all equitable … rights …; and … shall so exercise its jurisdiction in every cause or matter before it as to secure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided.”
	By section 151, “cause” includes any action commenced by writ, and Mr Engelman argues that when reading sections 37 and 49 together it is clear that the court can grant interlocutory relief between judgment and execution, since the “cause” is still “before the court” after judgment has been given.
	Smith v Cowell  (1880) 6 QBD 75 was a case on similar facts: a creditor who had recovered judgment sued on a writ of elegit to which the sheriff returned that there were no goods or lands of the debtor which he could deliver.  As the debtor was entitled to an equity of redemption on certain land the judgment creditor applied, to the judge in chambers in the same action, for the appointment of a receiver, and it was held that he was entitled to do so.  In considering the meaning of the word “interlocutory,” Baggallay LJ said, at p 77:
	“	The question is whether a fresh action is necessary.  Section 25(8) of the Judicature Act 1873 provides that ‘a mandamus or injunction may be granted, or a receiver appointed by an interlocutory order of the court,’ in all cases in which it shall appear just and convenient; and the defendant’s contention is that the court has no power under that section to make an order for a receiver in an action after judgment, for that the words ‘interlocutory order’ mean an order prior to final judgment.  But with that contention I cannot agree.  The interpretation of the word ‘interlocutory,’ as used in that subsection, is to be found later on in the subsection itself, which provides that ‘if an injunction is asked either before, or at, or after hearing of a cause,’ it may be granted. …  But it is only by an interlocutory order that the court has power under this section to grant an injunction. In the case of an injunction therefore, the section clearly contemplates an interlocutory order being made after the hearing of a cause, or in other words, after judgment.”
	It is to be observed that the section which the court was there considering was section 25(8) of the Supreme Court of Judicature Act 1873 and that subsection is the precursor of section 37 of the Act of 1981, although the former contained additional words not present in the latter, which the court used as an aid to construction: see also Nanda v Nanda [1968] P 351, 357-361, where the corresponding section of the Supreme Court of Judicature (Consolidation) Act 1925 was invoked to reach a similar conclusion.
	The matter is concluded by the terms of RSC Ord 29, r 1 which gives effect to the decision in Smith v Cowell, 6 QBD 75.  That rule provides, by sub-rule (1):
	“	An application for a grant of an injunction may be made by any party to a cause or matter before or after the trial of the cause or matter, whether or not a claim for the injunction was included in that party’s writ, originating summons, counterclaim or third party notice, as the case may be.”
	There is accordingly, in my judgment, power to grant an interlocutory injunction between final judgment and execution”

19.Farquharson J identified two questions: first, whether the court has power to grant an interlocutory injunction after final judgment; and secondly, if it has, whether such power should be exercised on the facts of the case before him.  He answered both questions in the affirmative.  The above dicta are pertinent to the first question.  Obviously, Farquharson J agreed with the interpretation of section 37 of the Supreme Court Act 1981 as advanced by counsel for the plaintiff that the English Supreme Court had jurisdiction to grant interlocutory injunction after judgment had been given.  He rejected defence counsel’s submission that the words ‘interlocutory order’ meant an order prior to final judgment and followed the interpretation of those words by the English Court of Appeal in Smith v Cowell as meaning any order whether made before or after judgment.  On that authority, Farquharson J concluded that the court had jurisdiction under section 37 of the Supreme Court Act 1981 to grant an interlocutory injunction between final judgment and execution and that Order 29 rule 1 of the English Rules of Supreme Court was to give effect to the decision in Smith v Cowell.  The relevant statutory provision considered in Smith v Cowell was section 25(8) of the English Supreme Court of Judicature Act 1873 which was equivalent to section 37 of the English Supreme Court Act 1981.  Section 21L(3) of our High Court Ordinance (Cap 4) is in identical terms with section 37 of the Supreme Court Act 1981.  Order 29, rule 1 of our RHC is also similar to that of the English Rules of Supreme Court.

20.On the authority of Smith v Cowell, there is no doubt that the English courts and the Hong Kong courts have jurisdiction to grant interlocutory injunction order before or after final judgment.  I have quoted extensively from Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd, but I am unable to find from the dicta of Farquharson J that such jurisdiction could only be exercised for the purpose of enforcing judgment or limited to granting Mareva injunctions.

21.Mr Ho SC refers me to the case of Smith v Peters (1875) LR 20 Eq 511, in which Jessel MR took the view that the court has jurisdiction to grant any interlocutory injunction which is reasonably asked as ancillary to the administration of justice.  He said at 513:

“

I have no hesitation in saying that there is no limit to the practice of the Court with regard to interlocutory applications so far as they are necessary and reasonable applications ancillary to the due performance of its functions, namely, the administration of justice at the hearing of the cause.  I know of no other limit.  Whether they are or are not to be granted must of course depend upon the special circumstances of the case.  But if authority were wanting for my guidance in this matter – and I think the principle is so clear that authority is not wanting – I might refer to the case which has been mentioned by the Plaintiff’s counsel, of Kynaston v East India Company 3 Sw 248, which was an application in a tithe suit to inspect the Defendant’s house before the hearing, in order to ascertain its value.  The object in ascertaining its value would be to make a decree against the Defendant at the hearing.  Here the object of ascertaining the value is also to make a decree against the Defendant at the hearing.  What does Lord Eldon say?  “I have found no case in point, but on principle I think the Court has authority.”  Therefore, in deciding the question of practice, he only looked at the principle.  That is what I am going to do.”

22.Though Mr Chong argues that Smith v Peters is not a case of post-judgment injunction, I think the principle is the same.  Section 21L(1) of the High Court Ordinance gives the court unfettered jurisdiction to grant interlocutory or final injunction in all cases in which it appears to the court to be just convenient to do so.  The only fetter to the exercise of that jurisdiction is that it must be just and convenient to do so.  I take that to be the same as reasonably necessary and ancillary to the due performance of the court’s functions in the administration of justice.  I think apart from that, there is really no limit to the exercise of that jurisdiction.  To restrict the exercise of the jurisdiction to the purpose of enforcing judgment as submitted by Mr Chong is an unnecessary and unjustified qualification to the unfettered jurisdiction of the court in the administration of justice.  In my view, this Court does have jurisdiction to grant interlocutory injunction, whether before or after judgment, so long as such injunction is reasonably necessary and ancillary to the administration of justice.  The court’s jurisdiction is not limited to the purpose of enforcing judgment or to granting Mareva injunctions.

23.Before turning to the second question whether the injunction sought by the Plaintiffs is reasonably necessary and ancillary to the administration of justice, I shall first consider the Defendants’ other grounds of objection as they have an impact on the conclusion that I am going to reach on the second question. 

Infringement or threaten infringement of the Plaintiffs’ right

24.Mr Chong submits that as a matter of law, the equitable jurisdiction of the court to grant injunction, whether interlocutory or final, is confined to case of infringement or threaten infringement of the rights of the person seeking the injunction.  I have no difficulty with that submission.  The right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably takes the shape of a cause of action: see Channel Tunnel Group Ltd and Another And Balfour Beatty construction Ltd [1993] AC 334 HL at 362B-D.

25.On that note, Mr Chong asks me to concentrate on the terms of the Order given under the Judgment and the terms of the Summons now before me.  The terms of my Order were that the Defendants shall return the sum of $201,000 to the Tong and to pay the Plaintiffs’ costs of the action.  The outstanding relief sought under the Summons is to restrain the Defendants from implementing the Resolutions passed or purportedly passed at the Meeting on 26 August 2007.  The Resolutions were that the Tong shall pay the Defendants’ costs of the action, fund their Appeal and to ratify the 2002 Pai-ji.  On the above basis, Mr Chong submits that there is no evidence as to what enforceable rights of the Plaintiffs would have been infringed by the Defendants acting pursuant to the Resolutions passed in the Meeting.  He says that the Defendants being statutory managers of the Tong registered under section 15 of the NTO and being sued in that capacity are entitled as members to participate and vote in such meetings of the Tong and as managers to hold and act upon any resolutions passed.  He argues that the injunction sought by the Plaintiffs is a gag order and it is difficult to see how the exercise of the Defendants’ personal right and discharge of statutory and equitable duty would constitute infringement of the Plaintiffs’ right. 

26.With respect to Mr Chong, his argument started on the wrong premise.  Administration of justice is not as rigid and mechanical as portraited by counsel.  The court would be failing in its duty by looking at nothing beyond the order and the summons before it when administering justice.  In dispensing justice, it is an immutable and a golden rule that the court must do so only after having regard to all the circumstances of the case.  The Order I made and the Summons should not be looked at in isolation, but in the total context in which the order came to be made and the application sought under the Summons.

27.I have briefly outlined the background of the Plaintiffs’ claim, the issues, the applicable principles of Chinese customary law and the reasons of my Judgment in paragraphs 9 to 14 above.  The full background of the dispute and reasons for my decision and the Order made can be found in that Judgment.  In a nutshell, the Plaintiffs complained that the assets of the Tong were wrongfully distributed by the Defendants in breach of their fiduciary duty as managers and trustees of the Tong and they sought an order that the Defendants shall repay $201,000 so distributed to the Tong and an injunction to restrain the Defendants from making further distribution of the Tong’s assets without unanimous consent of all members of the Tong.  On my finding, the Defendants were in breach of their fiduciary duty and caused distribution of $201,000 from the assets of the Tong.  I ordered the Defendants to personally repay the Tong so as to make good the funds which they caused to be depleted by their breach of fiduciary duty and to pay the Plaintiffs’ costs of the action.

28.Mr Chong says that the members of a t’ong had a right to hold meetings and pass resolutions.  I agree.  He submits that the Defendants had a right and duty to act pursuant to any resolutions passed.  I say emphatically “No”.  That right is not unqualified, at least not in the circumstances of this case.  Assets of the Tong is held in trust for the benefit of all members of the Tong, including the Plaintiffs.  It is beyond argument that the Plaintiffs have an interest in the assets of the Tong.  The Judgment has clearly established that rental income and mesne profit derived from the land belonging to the Tong is land within the meaning of the NTO to which Chinese customary law is applicable.  Under Chinese customary law, such income and mesne profit are t’ong property which is meant to be indivisible, inalienable and perpetual to be held for the benefit of the present and all future generations.  Such t’ong property could only be distributed under circumstances of necessity or in reality with unanimous consent of all members of the t’ong.

29.Compensation from land resumption and some mesne profit are now locked in the bank accounts of the Tong and inaccessible to the Defendants without the consent of the Plaintiffs.  The only funds which the Defendants could lay their hands on for the purpose of giving effect to the Resolutions are rental income which they somehow managed to collect in the form of cash and which they chose not to disclose to the Plaintiffs.  They are seeking to distribute that “land” to the three Defendants to meet their personal liability incurred through their breach of fiduciary duty owed to the Tong.  Apart from their personal liability to the Plaintiffs’ costs, the Defendants’ liability includes repaying the Tong for the funds they caused to be depleted.  The “land” is not being distributed for the benefit of the Tong as a whole, or for the majority of the Tong or for the four major fongs of the Tong.  The “land” is being distributed solely for the benefit of three particular members of the Tong, namely the three mangers who were in breach of fiduciary duty owed to the Tong.  There are plainly no circumstances of necessity requiring the Tong to do so.  It is wrong and prejudicial to the interest of the Tong to do so.  Legally, such distribution would be unlawful under Chinese customary law.  The majority of the Tong has no right to pass any resolution which has the effect of distributing the Tong’s asset to the three members of the Tong to the exclusion of the other members and the future generations.  The Defendants as managers and trustees are under a statutory duty not to cause such illegal distribution of the Tong’s property to themselves.  All these issues were canvassed in the Judgment.  The Plaintiffs certainly has an interest in the “land” which is sought to be distributed to the Defendants.  The Defendants’ threat to act pursuant to the Resolutions is a clear threat of infringement of the Plaintiffs’ right as members of the Tong.  The 1^st Plaintiff as manager even has a duty to prevent such distribution.

Effect of pre-empting the Appeal

30.Mr Chong submits that holding a meeting of the members, voting in such meeting and acting upon any resolutions passed would not have the effect of pre-empting the oncoming Appeal.  In view of my analysis in paragraph 29, I am just surprised by such submission and dismiss it forthwith. 

31.I recognise the Defendants’ right to convene meetings of the Tong and the members’ right to hold, attend and to vote to resolutions at such meetings.  Hence, I made no interim injunction order restraining them from so doing.  The only live issue now is whether I should restrain the Defendants from carrying out or giving effect to the Resolutions passed or purportedly passed.  For reasons given in paragraph 29, what the Defendants seek to do is a threaten infringement of the Plaintiffs’ interest as members of the Tong. 

32.The Defendants were ordered to return to the Tong $201,000 which they had in breach of their fiduciary duty distributed and depleted from the Tong.  Were the Defendants allowed to carry out Resolution (c), it would render my Order nugatory.  The Tong will remain depleted of its funds. 

33.The Defendants were also ordered to pay the Plaintiffs’ costs.  Though I did not order that the Defendants may not be reimbursed of the costs by the Tong, to allow the Defendants to give effect to Resolution (a) would be contrary to the spirit of my Order and would breach the principle of Chinese customary law that t’ong property is inalienable, indivisible and perpetual. 

34.To allow the Defendants to carry out Resolution (b) is absolutely ridiculous.  On my finding, the Defendants were in breach of fiduciary duty owed to the Tong in depleting the Tong of its funds.  By Resolution (b), the Defendants are seeking to have the Tong to finance their continued breach of fiduciary duty by paying their costs of the Appeal.

35.Clearly, what the Defendants are seeking to achieve by convening the Meeting and passing the Resolutions is to render my Judgment nugatory.  Were they able to do that, the Appeal would be unnecessary.  Whether they are successful at the Appeal or not, would be of no consequence to the Defendants.  To allow them to carry out any of the Resolutions would have the effect of pre-empting the Appeal.

The Order does not preclude the Defendants from seeking indemnity from the Tong

36.Mr Chong submits that my Order does not expressly restrain the Defendants from seeking indemnity from the Tong.  He repeats his argument that as a matter of law, members are entitled to hold, participate in and to pass resolutions at such meetings and the Defendants as managers are entitled to act on such resolutions.  Hence, he submits that the Defendants would not be infringing my Order if, pursuant to the Resolutions passed, they reimburse themselves of their own legal expenses and of the Plaintiffs’ costs in the original action which they were ordered to pay and to pay their costs of the Appeal from the funds of the Tong.

37.However, it must not be forgotten that the only funds of the Tong which the Defendants could use to reimburse themselves, pay costs of the action and of the Appeal are rental income or mesne profits from land own by the Tong, which is land within the meaning of NTO.  It must also not be forgotten that one of the remedies sought by the Plaintiffs in the original action was an interlocutory injunction restraining the Defendants from making further distribution of the Tong’s property without their consent.  Essentially, I found in favour of the Plaintiffs.  I found the Defendants were in breach of fiduciary duty owed to the Tong by effecting distribution of the Tong’s property without unanimous consent.  But I refrained from exercising my discretion and did not grant any injunction order.  I so refrained in the bona fide belief that these managers are fiduciary agents of the Tong and will discharge their duty to the Tong in a responsible and dutiful manner, especially now that they have been informed by my Judgment that their previous conduct was in breach of their fiduciary duty.  If they act in the best interest of the Tong, they would respect my Order.    But, they are now seeking to repeat the very conduct which I have told them in unequivocal terms in my Judgment amounted to breach of fiduciary duty owed to the Tong.  Though the terms of my Order do not expressly restrain the Defendants from seeking indemnity from the Tong, that does not preclude me from granting a post-judgment injunction order when such remedy has been sought and the Court comes to realise from the Defendants subsequent conduct that such remedy should have been ordered in the first place.

No jurisdiction to interfere with internal affairs of the Tong or exercise by members of their rights as members of the Tong

38.Mr Chong submits that the court does not have jurisdiction over internal arrangement amongst members of the Tong in regulating its own business and affairs or jurisdiction to prevent the exercise by members of their rights, in particular in participating in and voting at any meetings of members and enforcing any resolution passed at such meetings.  I agree with that submission as a general proposition, but that proposition is not unqualified.  The court can always intervene when any act to be done pursuant to such resolution is unlawful or would infringe the right of another.  Enough has been said that what the Defendants attempted to do pursuant to the Resolutions would be unlawful.  This Court has jurisdiction to intervene.

39.Mr Chong submits that the Defendants were entitled to seek a third party to indemnify themselves of their legal costs in the action and to indemnify them of their costs of the Appeal.  If the third party is a genuine third party, I would have no quarrel with that submission.  For example, if the Defendants ask their spouses or children to settle the costs or to pay the sum of $201,000 to the Tong, it is perfectly legitimate.  However, the third party here is the Tong, which is the victim of the Defendants’ breach of fiduciary duty.  This is what the original action is about.  To cause the Tong to discharge the Defendants’ liability for breach of fiduciary duty is by itself a further breach of fiduciary duty.  It is their duty as managers of the Tong to protect the interest of the Tong.  However, what the Defendants are now seeking to do is not only to put their personal interest before the Tong’s interest, but to act to the prejudice of the Tong. 

40.Mr Chong further submits that unlike distribution of assets of the Tong, such as Pai-ji, disbursement of expenses incurred by managers in the course of discharge of their duty does not require the unanimous consent of all members of the Tong and there is no evidence to support such contention.  The falsity of that argument is that acts done by managers of the Tong in breach of their fiduciary duty owed to the Tong could not be acts done in the course of the discharge of their duty as such managers.    

The Defendants’ right under section 56 of the Trustee Ordinance

41.Mr Chong refers me to section 56 of the Trustee Ordinance and Order 85 of the RHC.  He argues that section 56 gives the court very wide discretion to deal with any issue raised by a trustee in the course of administration of trust.  This discretion includes, inter alia, power of the court to determine whether the Defendants should be indemnified from funds of the Tong in respect of the costs of the original action and the costs of the oncoming Appeal.  Hence, he submits that irrespective of my Order and the withdrawal by consent of the Defendants’ application to vary the costs order nisi, there is nothing to prevent the Defendants from taking out separate application for determination of a wider issue which would necessarily include determination of this smaller issue under section 56 of the Trustee Ordinance and Order 85 of the RHC.  He says that an originating summons has been taken out by the Defendants to deal with those and other issues.  That application is not before me.  But as a first impression, so far as the two issues are concerned, I do not consider Mr Chong’s submission attractive.  His argument, with respect, is convoluted.  If the Defendants wish to seek the court’s directions under section 56 of the Trustee Ordinance in respect of the two issues, there is simply no reason why they must carry out the Resolutions before seeking the court’s directions.  If the Resolutions were carried out, such application would be redundant.

No jurisdiction to restrain members of the Tong from holding, participating, passing resolutions and thereafter to act upon such resolutions

42.Except for the Plaintiffs and the Defendants in their personal capacity, the other members are not parties to the action.  Hence, Mr Chong argues that the Court has no jurisdiction to restrain members of the Tong from holding, participating, passing resolutions and thereafter to act upon such resolutions.  The members had not been restrained from holding, participating and passing resolutions.  Indeed, the Meeting was held and the Resolutions were passed or purportedly passed.  This part of Mr Chong’s argument is wholly academic.  As to whether the Court has jurisdiction to restrain members of the Tong from acting upon such resolutions, it is an non-issue.  Under paragraph 5 of the Summons, the Plaintiffs sought an order that the Defendants should be ordered to represent members of the Tong, except members of the 3^rd fong.  Though Mr Ho SC has not expressly withdrawn that paragraph from the Summons, he has not pursued this remedy in his submission.  He confirmed that in his closing submission.  However, a ton’g can only act through its managers.  No individual member can act on behalf of the Tong.  There is no need for the Plaintiffs to restrain the members from carrying out the Resolutions.  But insofar as the Defendants are concerned, they are properly before the Court and I have jurisdiction to make an order binding on them. 

Second issue: Whether the discretion to grant the injunction order should be exercised

43.Having considered the Defendants’ various objections, I now turn to consider the ultimate question whether the discretion to grant post-judgment injunction order should be exercised.  None of the grounds of objection advanced by Mr Chong on behalf of the Defendants has any merit.  I also reject Mr Chong’s submission that in considering the Summons, I should only concentrate on the contents of my Order and ignore the total context in which the Order came to be made and the application under the Summons sought.  I repeat my observations in paragraphs 26 to 29 above.  One of the remedies sought by the Plaintiffs in the original action was an interlocutory injunction restraining the Defendants from making further distribution of the Tong’s assets without their consent.  Essentially, I found in favour of the Plaintiffs.  I found the Defendants were in breach of fiduciary duty owed to the Tong by effecting distribution of the Tong’s property without unanimous consent of the members.  But I refrained from exercising my discretion and did not grant any injunction order.  I so refrained in the bona fide belief that these managers are fiduciary agents of the Tong and will discharge their duty to the Tong in a responsible and dutiful manner, especially now that they have been informed by my Judgment that their previous conduct was in breach of their fiduciary duty.  I believe, and I must add mistakenly and very regrettably, that after reading my Judgment they would, especially with proper legal advice, not attempt any further distribution of the Tong’s asset without unanimous consent.  I was wrong.  They are now seeking to repeat the very conduct which I have told them in unequivocal terms in my Judgment amounted to breach of fiduciary duty owed to the Tong.  They are seeking to apply the Tong’s property for the purpose of discharging their personal liability incurred for their breach of fiduciary duty owed to the Tong.   They are attempting to do knowingly what they have been told in unequivocal terms would be unlawful.  T’ong property is inalienable, indivisible and held in perpetuity for the present and all future generations.  It may not be disposed of unless under circumstances of necessity.  What the Defendants are attempting to do offends any principle of fairness and equity.  They are now attempting to flout my Order in the most recalcitrant and contemptuous manner.  If the Defendants were permitted to do what they are seeking to do, not only would it render my Order nugatory and pre-empt the oncoming Appeal, it would make a mockery of our administration of justice.  The only way my discretion could be exercised now is to allow the interim injunction order to continue until conclusion of the Appeal. 

Costs

44.This is a bad case of trustees’ breach of fiduciary duty.  The breach was not an unwitting or technical breach.  Throughout the years, the Defendants knew full well that the Plaintiffs complained of distribution of the Tong’s asset without their consent.  As the facts of the original action show, the members of the fongs whom the Defendants represented acted oppressively against the Plaintiffs.  Had the Defendants acted bona fide, they should have taken proper legal advice at the latest before defending the original action.  Even according to the opinion of their legal expert, t’ong property may not be distributed unless in circumstances of necessity, which is the most important legal principle applicable to the original action.  They took side with the majority which they represented because that also coincided with their personal interest.  Obviously, the breach of duty was committed for the interest of the fongs they represented.  The action was instituted against the Defendants personally for breach of fiduciary duty.  It is a hostile litigation in which they were interested and not one in which they took a neutral stand.  Had they thought they were defending the Tong and hence should be reimbursed their costs by the Tong, they should have sought a Beddoe order or made an application under section 56 of the Trustee Ordinance before defending the action to proceed with reviewing my costs order nisi after the Judgment was handed down.  They did not.  Having been told that their conduct was unlawful and constituted breach of fiduciary duty, they are now attempting to render my Order nugatory by repeating their breach of fiduciary duty in precisely the same manner. 

45.At the Summons hearing on 23 August 2007 when I granted the interim injunction order, I have already warned counsel that there was little purpose to be achieved by not allowing the interim injunction order to continue until hearing of the Appeal.  That suggestion was strenuously resisted by Mr Chong who assured me that there was good ground to insist a determination even for a couple of months before the hearing of the Appeal.  Obviously, the Defendants wanted to have the Plaintiffs’ application dismissed so that they could use the practically unlimited financial resources of the Tong to defend their breach of fiduciary duty and to perpetrate their oppression against the Plaintiffs who are the minority.  They might have been fuelled with expectation of success by those now representing them.  Be that as it may, I feel a strong sense of indignation at what the Defendants were seeking to do and the manner in which they resist the Plaintiffs’ application.  For that reason, the costs of this application should be determined independently of the outcome of the Appeal and be paid by the Defendants on an indemnity basis forthwith.

Conclusion

46.For the above reasons, I order that the Defendants be restrained from implementing any of the Resolutions passed or purportedly passed at the Meeting on 26 August 2007 until disposal of the Appeal.  I also make a costs order nisi that the Defendants shall pay the Plaintiffs’ costs of the application forthwith to be taxed on an indemnity basis with certificate for two counsel.

Mr Ambrose Ho, SC and Mr Paul H M Leung, instructed by Messrs Rowdget W Young & Co, for the Plaintiffs by original action and the Defendants by counterclaim

Mr K M Chong and Mr T C Chong, instructed by Messrs Chiu, Szeto & Cheng, for the 1^st, 3^rd and 4^th Defendants by original action and the 1^st, 3^rd and 4^th Plaintiffs by counterclaim