Tang Kap Wing Tso v. Tang Leuk Tso and Another
Read the full judgment text of HCA 1944/2007 on BabelCite. This High Court CFI judgment was delivered on 25 June 2010 before Hon Chung J.
Civil litigation – New Territories t’so – Share transfer – Breach of trust – Duty of care – Non-joinder of necessary party – Costs – Plaintiff sought declaration that transfer of 23 shares to Tang senior was invalid – Managers relied on 1983 order and 2003 deed – Court found Mdm Liu authorized Tang junior to act on her behalf – Managers discharged duties – Non-joinder of Tang senior’s estate militated against discretionary relief – Claim dismissed – Costs follow the event
Legal issues: Validity of share transfer · Duty of Managers · Non-joinder of necessary party · Costs
Outcome: Claim against Managers dismissed. Claim against Tang junior dismissed.
Cited by 4 cases · Cites 4 cases
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HCA 1944/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1944 OF 2007 ____________
Before: Hon Chung J in Court Dates of Hearing: 31 May 2010, 1 June and 4 June 2010 Date of Handing Down Judgment: 25 June 2010 _______________ J U D G M E N T _______________ Introduction 1.The plaintiff commenced this action in September 2007. She seeks various kinds of relief against the defendants. Background 2.The plaintiff (“Mdm Liu”) is the lawful and natural mother of the 2nd defendant (“Tang junior”). 3.Tang junior’s father (“Tang senior”) married Mdm Liu when they were respectively about 19 and 15 years old (according to the judgment in the 2000 divorce suit (see para. 25(a) below), the marriage took place in around 1951). There are two children to the marriage: Tang junior and his sister. 4.A “Tang Kap Wing Tso” and a “Tang Leuk Tso” have respectively been established pursuant to the provisions of the New Territories Ordnance (Cap. 97). Mdm Liu and Tang junior are the managers of the “Tang Kap Wing Tso”. 5.It is common ground the “Tang Kap Wing Tso” is a family Tso. The true nature of the “Tang Leuk Tso” is disputed (but see also para. 13 and 14 below). The 1st defendants (“the Managers”) contend that it is a t’ong and not a t’so. The members’ interest in the “Tang Leuk Tso” has been held in the form of shares in the t’so (according to Mdm Liu) or t’ong (according to the Managers); there were and are 285 shares in total. 6.Tang senior used to be one of the 3 managers of the “Tang Leuk Tso” until he passed away in 2005. 7.Tang senior and Tang junior have been involved in two legal proceedings:-
8.The “Tang Kap Wing Tso” used to hold 23 shares in the “Tang Leuk Tso” (“the said 23 shares”). The main dispute in this action is whether it still holds the said 23 shares. Mdm Liu says so (so does Tang junior), the Managers say otherwise. 9.Two sums arose out of the said 23 shares:-
Another dispute in this action is whether the Managers correctly paid these sums to Tang senior (or his successors). The Parties’ Case (a) Mdm Liu and the Managers 10.The essence of Mdm Liu’s case against the Managers is that they failed their duties as managers of a New Territories t’so and were in breach of trust: para. 3, written closing submissions. 11.There is no dispute Tang senior at various times claimed to the Managers he became the holder of the said 23 shares. Mdm Liu alleges that the Managers wrongfully heeded his words and caused the said 23 shares to be registered in Tang senior’s name. She claims not to know about Tang senior’s claim or the transfer. According to her, the Managers ought to have (i) sought her confirmation, and (ii) verified the claim from the relevant documents: para. 5B(c), re-amended statement of claim. 12.The Managers deny the allegations. They claim:-
The 1983 verbal agreement was no longer mentioned by the end of the trial (see also para. 62 below). 13.As stated above, the nature of the “Tang Leuk Tso” is disputed. However, in her verbal closing submission, Mdm Liu indicated that the dispute is irrelevant. This is because she simply relies on s. 15, Cap. 97 which makes no practical distinction among “clan, family or t’ong” in relation to dealings in land belonging to “clan, family or t’ong”. 14.The above approach of Mdm Liu explains why expert evidence concerning Chinese customary law was not adduced during trial. (b) Mdm Liu and Tang Junior 15.A few words need to be spent on this topic because of the rather unusual way in which matters proceeded in this action. 16.When this action commenced in September 2007, Tang junior was one of the co-plaintiffs (with Mdm Liu). There was no averment relating to Tang senior’s conduct. 17.The statement of claim was amended in May 2008. Tang junior was added as a defendant (having been removed as a co-plaintiff). A new para. 13 of the amended statement of claim avers:-
No relief was sought against Tang junior at all. Further, there was still no averment relating to Tang senior’s conduct. 18.The statement of claim was re-amended in March 2010 (subsequent to queries raised by the court during a pre-trial review on 17 March 2010). The averments summarised in para. 10 and 11 above were added. Para. 13 was changed to:-
19.The relief sought against Tang junior is in short:-
20.Tang junior’s defence was filed and served in April 2010. He expressly admits that he executed what in effect was the Dec 2002 agreement and the 2003 deed, and that they were executed without Mdm Liu’s knowledge. Hence, that transaction could not be valid. 21.Despite Tang junior’s admission of Mdm Liu’s claim against him, for reason(s) not immediately apparent, Mdm Liu has not sought to enter judgment against Tang junior. (c) Potential Claim against Tang Senior 22.In view of the averments relating to Tang senior’s conduct, and the related issue of the identity of the true owner of the said 23 shares (see also para. 68 below), query was raised during the pre-trial review hearings on 17 March and 26 April 2010 as to the need to join Tang senior’s estate as a party. The query was raised in view of RHC Ord. 15 r. 6(2). 23.After ample opportunity to consider the matter, Mdm Liu decided not to join Tang senior’s estate, despite having been expressly warned that her decision may have an impact on the outcome of this action. The trial proceeded on that basis. 24.This aspect will be dealt with under the heading “Non-joinder of Tang Senior” below. Related Earlier Proceedings 25.The following proceedings were mentioned during the trial of this action (set out below in chronological order):-
26.Although the contents of the above judgments are strictly not evidence in this action, they enable one to better understand some of the questions asked during cross-examination, as well as to comprehend some of the verbal exchanges and/or demeanour of the witnesses who testified in this action. 27.The judgment of the 2000 divorce suit sets out the marital history of Tang senior and Mdm Lai. In accordance with Chinese customary practice, the marriage between Tang senior and Mdm Liu was arranged by the older generation. But by then, Tang senior already had a relationship with another female. He brought along his lover to meet Mdm Liu before the marriage. 28.It can be imagined the relationship between the married couple was not totally emotional or harmonious. This was borne out by the fact Tang senior was seldom at home and spent most time with the other female, as well as by the bitterness shown in parts of Mdm Liu’s testimony concerning Tang senior. Mdm Liu and her children were by and large supported by the family of Tang senior. In 2000, the couple was formally divorced (on the ground of desertion since 1956) after the marriage lasted (at least on paper) for about half a century. 29.Further, it can also be imagined that the relationship between Mdm Liu and her children (including Tang junior) has been close. This was demonstrated by the exchanges between her and Tang junior in court when he “cross-examined” her. More will be said below about their relationship during the times of the 1978 action and the 1999 action. 30.The importance of the 2006 trespass action and the 2006 probate action is that they show that Mdm Liu and Tang junior ought to be well aware of the identity of who has/have been administering Tang senior’s estate (see also para. 69 below). 31.The matters set out in para. 27 to 29 above are relevant to the assessment of the witnesses’ credibility and/or reliability. Witnesses’ Credibility and/or Reliability (a) Mdm Liu 32.Judging from the totality of the evidence, I find that Mdm Liu has in effect admitted that she left matters relating to the 1978 action (and the 1983 order) and the 1999 action (and the 2003 deed) to Tang junior to deal with. Although she did not know the details relating to those matters, she was content for Tang junior to make the decisions for her. Certain parts of Tang junior’s testimony also support such conclusion (see para. 44 below). 33.To the extent those parts of her testimony can be so understood, full weight should be given. On the other hand, insofar as it may be argued that other parts of her testimony (including those elicited during Tang junior’s “cross-examination” of Mdm Liu) militates against that admission, they are rejected as incredible and unreliable. 34.For ease of reference, the parts of Mdm Liu’s cross-examination which amount to the said admission are set out below:-
…..
(emphasis supplied). 35.In so concluding, I have borne in mind:-
(b) Tang Junior 36.I find Tang junior to be a shrewd witness, but, unfortunately, I find him not to be an entirely truthful or reliable one. The matters in support of the finding include the following. 37.First, in view of the matters set out in para. 16 to 21, 29 and 35(2) to 35(3) above, Mdm Liu and Tang junior are not real adversaries. Instead, these are signs Tang junior’s role as a co-defendant is only part of an elaborate litigation strategy. 38.Further to the matters set out in para. 16 to 21, 29 and 35(2) to 35(3) above, there were occasions during trial when Tang junior attempted to answer the court’s queries (addressed to Mdm Liu’s counsel) regarding the relevance of questions asked by counsel. 39.Secondly, during his cross-examination, Tang junior disclosed that the 2003 deed was a device purely to avoid getting Tang senior into trouble. His claim can be summarised as follows. The 1999 action was commenced to sue the 3 managers of the “Tang Leuk Tso” (one of them being Tang senior), and put the propriety of their conduct in issue. The other co-defendants approached Tang junior and threatened to expose the criminal acts of Tang senior for misrepresenting the share ownership. In order to save Tang senior, Tang junior decided to settle the 1999 action. However, both Tang senior and Tang junior were at the same time well aware the 2003 deed would not affect the interest of “Tang Kap Wing Tso” because it was not signed by Mdm Liu. 40.The above claim is inherently implausible for several reasons. One, although the Dec 2002 agreement was some kind of “home-made” document, it merged into the 2003 deed which was drafted by qualified lawyers. That lawyers were engaged shows the solemnity of the occasion. 41.Two, the above claim differs from the lengthy defence of Tang junior filed in April 2010. According to the pleading, it was Tang senior who proposed to settle the dispute (which should mean the 1999 action) by buying-out the said 23 shares: para. 7 thereof. His defence pleads that the amount Tang junior received from Tang senior ($800,000 gross, but only about $600,000 net) was in fact only the compensation payment for government land resumption. Hence, the 2003 deed was not a pure “dress-up” deal. 42.Three, assuming Tang senior’s conduct to be improper (or even criminal), there was no necessary link between his (or Tang junior’s) desire to have the 1999 action ceased and any of the said 23 shares; the 1999 action could simply have been withdrawn (or even dismissed) by consent without any reference to the said 23 shares. 43.The more probable background explaining why the 1999 action was brought and why the 2003 deed was executed can be gleaned from the following parts of Tang junior’s cross-examination by the Managers:-
(emphasis supplied). 44.In fact, some of Tang junior’s answers given during the Managers’ cross-examination show that Mdm Liu gave him practically a free hand to deal with the legal matters relating to the said 23 shares, and the land belonging to the “Tang Kap Wing Tso”, since the 1978 action:-
(emphasis supplied). (c) Defence Witness 45.The testimony of the defence witness covers essentially three matters:-
46.Despite the cross-examination, I find that the testimony of the defence witness concerning the above matters to be truthful and reliable. Findings of Fact 47.Having considered the totality of the evidence, I make the following findings of fact. 48.Tang senior verbally represented at various stages he was entitled to the said 23 shares. 49.The Managers (or their predecessors, as the case may be) sought, and were shown, the 1983 order and the 2003 deed as documentary proof of his verbal claim of entitlement. 50.Tang junior knew (or at least expected) that the 1983 order and the 2003 deed would be made use of by Tang senior. Especially with regard to the 2003 deed, he knew (or at least expected) that Tang senior would make use of it in relation to the said 23 shares. 51.The 2003 deed should be understood, and be given effect, in according with the language appearing on the face of the document. 52.Mdm Liu placed Tang junior in charge of the matters relating to the “Tang Kap Wing Tso”, in particular those relating to the said 23 shares. She either was actually aware of those matters, or at the very least was content to allow Tang junior to determine what he considered to be appropriate. Can the 1983 Order Assist the Managers ? 53.This depends (among other things) on the true meaning of the 1983 order. But before dealing with that aspect, the history of the Managers’ pleadings need to be briefly mentioned. 54.The 1983 order was not referred to in the defence filed in February 2008 (or the amended defence filed in March 2008). It was first mentioned in the re-amended statement of claim filed in May 2009 (para. 5B thereof). 55.Mdm Liu avers in gist Tang senior relied on the 1983 order in support of his verbal claim that 10 of the said 23 shares had been transferred to him: para. 5B(a), re-amended statement of claim. The re-amended defence relies on the 1983 order as support for the following:-
See para. 24 (especially para. 24(2) to 24(3)) thereof. 56.Thus, it has never been the Managers’ pleaded case that the 1983 order by itself should provide a cause of defence. The 1983 order is rather relied on as a matter in support of their case that:-
See para. 24(5) to 24(6), re-amended defence. 57.The Managers seem to have departed from their case summarised above (see, for example, para. 2.1(1), written closing submissions). 58.Because of the state of their pleadings, I doubt if it is open to the Managers to put forth such a case. But even if they were, the true meaning of the 1983 order cannot support it. 59.The relevant parts of the 1983 order are:-
(emphasis supplied). 60.The Jones Lang Wootton report referred to in the 1983 order has not been adduced as evidence, nor have its contents been disclosed in this action. There is therefore nothing in the above terms of the 1983 order which can indicate a transfer of 10 of the said 23 shares in Tang senior’s favour. 61.For this reason, except to the extent set out in para. 56 above and 64 and 66 below, I conclude that the 1983 order by itself cannot advance the Managers’ case. 62.Para. 7, re-amended defence pleads a verbal agreement made between Tang senior and Tang junior in about 1983 for the transfer of 10 of the said 23 shares. The 1983 order is said to be part of that verbal agreement. However, the verbal agreement is no longer mentioned by the end of the trial. Can the 2003 Deed Assist the Managers ? 63.The relevant parts of the 2003 deed are:-
(emphasis supplied). 64.It is immediately apparent the reference to Tang junior being “the sole successor of the ‘Tang Kap Wing Tso’” in clause 1(b), the 2003 deed ties in with para. 2(d), the 1983 order. That part of the 1983 order lends support to the truth of that reference in the 2003 deed. 65.It is undisputed that, prior to the 1978 action, the “Tang Kap Wing Tso” was entitled to the said 23 shares. 66.According to the Managers, they became satisfied that the said 23 shares were transferred to Tang senior after they were (i) shown records handed over by the former managers, (ii) informed by Tang senior verbally, and (iii) also shown the 1983 order and the 2003 deed: para. 45 above. 67.The 2003 deed only expressly referred to 13 of the said 23 shares (the remaining 10 of the said 23 shares were not): clause 1(d) thereof states that 13 of the said 23 shares have been assigned to Tang senior. However, clause 1(b) thereof acknowledges in addition that the “Tang Kap Wing Tso” was not entitled to any other shares in the “Tang Leuk Tso”. When these clauses are read together, the 2003 deed also lends support to Tang senior’s claim of entitlement to the said 23 shares (in place of the “Tang Kap Wing Tso”). Non-joinder of Tang Senior 68.As the Managers correctly point out, Mdm Liu’s claim in this action:-
Tang senior is a necessary party to this action. Further, the benefit of the 2003 deed expressly devolves upon Tang senior’s successors and assigns (clause 4 thereof). 69.It is common ground Tang senior passed away in November 2005, leaving behind his estate (which apparently has been administered by the plaintiffs of the 2006 probate action (see para. 25(b) and 25(c) and 30 above)). 70.During the pre-trial review hearings on 17 March and 26 April 2010 (respectively about 2-1/2 months and one month before the trial), Mdm Liu has specifically been alerted to the need to join Tang senior (or, more precisely, his estate). Because of the 2006 probate action, the identity of Tang senior’s successors should be well known to Mdm Liu (at least through Tang junior (see para. 25(c) and 30 above)). 71.Despite the above, Mdm Liu instructed her legal advisers not to seek any joinder of parties. Except that it was a deliberate decision, no satisfactory explanation has been given. 72.Ord. 15 r. 6 prevents an action from being defeated by the non-joinder of parties, and removes the plea in abatement and with demurrers for want of parties: Hong Kong Civil Procedure 2010, Vol. 1, para. 15/6/1. The purpose is to enable all parties to disputes relating to one subject-matter to be brought before the court at the same time so that the disputes may be determined without delay, inconvenience or additional expense of multiple-proceedings. 73.In fact, Ord. 15 r. 6(2)(b) empowers the court to order a joinder of its own motion. The practical problem with this action is that the dates of the pre-trial review hearing were too proximate to the trial date, so that any joinder would very likely result in a delay. Added to this was Mdm Liu’s deliberate choice of not seeking a joinder. 74.For those reasons, no joinder was ordered. However, Mdm Liu was expressly informed that the absence of a necessary or proper party may have an impact on the outcome of this action. 75.Part of the relief sought by Mdm Liu is discretionary in nature, that is, the injunctive and declaratory orders. Having considered the matters above, I find that the non-joinder should be taken into account as a factor which militates against granting such orders. Conclusion 76.By virtue of the matters set out above, I am satisfied that Mdm Liu has in effect authorised Tang junior to also act on her behalf in relation to the 1978 action, the 1983 order, the 1999 action and the 2003 deed. 77.Mdm Liu’s written closing submissions have from time to time referred to the need for the unanimous consent of all members of the “Tang Kap Wing Tso” before the t’so properties can be effectively disposed of: for example, para. 16 to 17 and 25 thereof. However, this is not what the re-amended statement of claim avers as the cause of action: see para. 5B(c) to 5D(b) thereof. It was not how Mdm Liu testified; there is no expert evidence to support such a case either. 78.Accordingly, the Managers have established that they have adequately discharged their duties in relation to the said 23 shares. There has been no lack of due diligence or care when they accepted Tang senior’s verbal representations and the documents shown by him. 79.The claim against the Managers is dismissed. Logically, the claim against Tang junior should be dismissed as well. Other Matters 80.In her written closing submissions, Mdm Liu relies on Light Ocean Investments Ltd. & Another v. Enway Development Ltd. [1994] 3 HKC 31 for the legal proposition that the Managers have occupied the position of a trustee for sale: p. 36F thereof. 81.If her purpose of relying on the Light Ocean Investments Ltd. case is to advance her case of the Managers’ breach of trust, then that decision can provide little assistance. The case concerned a dispute between the vendor and purchaser of lots of land in Yuen Long. The issue was whether a vendor without title (but who obtained it through the new appointed managers of a t’so) could force the purchaser to complete the transaction. That issue in turn hinged on the registration (pursuant to s. 15, New Territories Ordinance (Cap. 97)) of the newly appointed managers. The court of appeal decided that because the managers’ appointment has not been registered, any agreement for sale entered into by them could only be a conditional sale. 82.Having said that, it seems trite law the Managers’ duty is to act with diligence and care: see, for example, Man Ping Nam & Another v. Man Fong Hang (2006) 9 HKCFAR 674, 692. 83.Mdm Liu also refers to the “self-dealing” rule in her written closing submissions. She asserts Tang senior has taken advantage of his position without disclosing the 2003 deed to her or seek her consent for the transfer of the said 23 shares. 84.As stated above, Mdm Liu for her own reasons has declined an invitation to join Tang senior’s estate. In addition, the “self-dealing” rule has not been included in her pleading. It is trite law (and accepted by Mdm Liu) such a transaction is not void but only voidable. The beneficiary can only have the transaction set aside within a reasonable time after its discovery: Beningfield v. Baxter (1886) 12 App Cas 167. Not pleading the “self-dealing” rule will have the effect of depriving the Managers a proper opportunity to plead, and prepare their defence, to such a case. 85.In any event, the reference to the “self-dealing” rule as against the Managers may be entirely unnecessary (Mdm Liu not having alleged they were personally involved); she claims the Managers were under a duty to make investigation or inquiries: para. 32, written closing submissions. This is not much different from her case regarding the Managers’ overall duty of due diligence and care (see para. 10, 11 and 82 above). Costs Order Nisi 86.As between Mdm Liu and the Managers, there is no apparent reason to depart from the usual rule that costs should follow the event. There will accordingly be a costs order nisi pursuant to Ord 42 r 5B(6) that the costs of this action be paid by Mdm Liu to the Managers, to be taxed if not agreed. 87.I leave it to the parties to decide if any further submissions are required as regards the costs between:-
Any written submission regarding the above should be lodged with court and serve within 14 days. In the absence of further submissions, there will also be the same costs order nisi as between Mdm Liu and Tang junior.
Mr Sammy Hui, instructed by Messrs Cheung & Yip, for the Plaintiff Mr Thomas Lai, instructed by Messrs Hastings & Co., for the 1st Defendant 2nd Defendant acts in person and present Plaintiff's appeal dismissed by Court of Appeal. Please refer to CACV196/2010 dated 6 July 2011 | |||||||||||||||||||||||||
Cases cited in this judgment