Tang Tak Sum and Another v. Tang Kai Fong

CACV 177/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 177 OF 2013

(ON APPEAL FROM HCA NO. 2089 OF 2009)

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BETWEEN

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Hon Cheung JA :

I. The appeal

1.The plaintiffs are the registered co-owners of a piece of land in the New Territories known as Lot 581 in Demarcation District 130 (‘the Land’).  The plaintiffs hold ¼ share in the Land.  The other co-owner who holds the remaining ¾ share is the defendant.  The defendant was originally only the owner of ¼ share of the Land.  He had in 1997 acquired another ¼ share from Tang Shun Wing (鄧 順 榮), Tang Chun Pang (鄧 振 鵬), Tang Tak On (鄧 德 安) and also another ¼ share from Tang Tung Chiu (鄧 棟 潮). 

2.The Land had been let out by the defendant as a car park which was against its authorized use.  The defendant has been collecting the rent of the Land without accounting to the plaintiffs.

3.By this action the plaintiffs asked for an account of the income and expenditure of the Land to be given by the defendant.  The plaintiffs also asked for an injunction to prohibit the defendant from permitting the Land to be used for an unauthorized purpose.

4.The defendant raised a counterclaim that he had acquired a title to the plaintiffs’ share of the Land by reason of adverse possession.

5.Deputy High Court Judge Linda Chan SC dismissed the plaintiffs’ claims and gave judgment for the defendant on his counterclaim.  The plaintiffs now appeal.

II. Facts

1) Tang Cheung Mou (鄧 暢 茂) and the 1939 Division of Family 

6.The Land originally belonged to Tang Lun Kwai (鄧 聯 桂), and one of his sons Tang Cheung Mou (鄧 暢 茂) became the lawful successor of the Land.  Tang Cheung Mou (鄧 暢 茂) also owned many other pieces of land in the New Territories.  He was born in 1872 and died in 1965 at the age of 93.  He had four sons, namely, Tang Yu Gan (鄧 裕 根), Tang Shui Sang (鄧 水 生), Tang Yuk Lam (鄧 煜 林) and Tang Tung Chiu (鄧 棟 潮).  Each of these four sons became the head of a branch or Fong (房).  The defendant belongs to the 1^st Fong. Tang Shun Wing (鄧 順 榮), Tang Chun Pang (鄧 振 鵬) and Tang Tak On (鄧 德 安) belong to the 2^nd Fong.  The plaintiffs belong to the 3^rd Fong while Tang Tung Chiu (鄧 棟 潮) belongs to the 4^th Fong.

7.In 1939, when Tang Cheung Mou (鄧 暢 茂) was 67 years of age, he wrote a document entitled ‘鄧 暢 茂 分 冊’ (Division of Family) setting out his wishes as to how his land would be allocated and used amongst the four Fongs.  The preamble reads :

「1) 余年近七旬，故將田園屋宇均派四房各執管業，以昭平允。惟望兒孫各人竭力營生，大振家聲。

2) 其餘父母需用口糧之田園，要待至父母用完之日，任由兒孫蠲貯創積，以作嘗贍之用。

3) 惟土名‘瓦窯墩’苗田壹段租谷，即撥歸佑盛所收，作為油燈之用；其田仍歸嘗業，而佑盛亦要補足糧銀。特此註明，以昭平允，俾得永承先業而勿替焉。以斯為囑。」　

For ease of reading I have separated the passage into three separate paragraphs.

8.Professor Wejen Chang, the plaintiffs’ expert on Chinese law and custom had provided a translation of the document.  I adopt the translation with modification where appropriate.

‘ 1. As I am approaching seventy years of age, I am having lands and houses divided into four equal shares to be distributed to the four Fongs of my family. Each of the branches will receive, a share as its own property. This is to demonstrate equity and fairness. I earnestly hope that my sons and grandsons will do their utmost to manage their fortune and bring honor and prosperity to my family.

2. The remaining land is to produce food for us, your parents.  Wait after we have finished using it, then you, our children, can apply for a reduction of land tax on it, manage it and save its proceeds for payment of ancestral worship.

3. Collection of rental from the piece of crop land locally known as瓦 窯 墩will be assigned to Yau-shing (佑 盛).  The rental is to defray the cost of the oil lamp.  However, that piece of land will still be ancestral worship property, and Yau-shing has to make up the deficit and pay the full amount of tax on it.  This is specifically noted here in order to demonstrate equity and fairness, and to ensure that the family members are to hold in perpetuity the property left to them by their ancestors and never to lose it.

4. This is my bidding.’

9.It is accepted by the parties that the land identified in the document as「瓦 窯 墩」is the Land in question, and that oil lamp (油燈) means ancestral worship.　

10.Tang Cheung Mou’s (鄧 暢 茂) first son Tang Yu Gan (鄧 裕 根) predeceased him and Tang Yu Gan’s (鄧 裕 根) son was Tang Yau Shing (鄧 佑 盛).  Tang Cheung Mou (鄧 暢 茂) appointed Tang Yau Shing (鄧 佑 盛) to collect rent from the Land.

2) Expert opinion

11.Professor Chang in his Opinion dated 18 January 2010 stated that :

‘ 4. The “division of family” book consists of a preamble, a “bidding” (囑) of Tang Cheung Mou, telling his descendents why and how his property was to be divided, distributed and used, and a detailed list of properties to be thus distributed.

……

16.   ….. Tang Cheung Mou’s intention is clear — he wanted to divide his property and distribute to his four sons, each an equal share, and reserve some other property, including瓦 窯 墩, to provide for him and his wife in their remaining years, and to turn it into ancestral worship property after their death.

17.  In doing so Tang Cheung Mou was evidently anxious to demonstrate his fairness.  So he used the phrase以 昭 平 允twice, once after stating that he was to distribute equal shares to the four branches of his family, the second time after stating the conditions to the favor he granted Tang Yau-shing.

……

20. But in the present case瓦 窯 墩was not “given” to Tang Yau-shing as a gift.  The “bidding” specifically said Tang Yau-shing was only to collect rental from瓦 窯 墩.

21. And the “bidding” did not say that Tang Yau-shing was to collect the rental from瓦 窯 墩for his own use during the lifetime of Tang Cheung Mou.  It specifically said that Tang Yau-shing was to use the rental to pay for the cost of keeping the ancestral worship oil lamp in order.

22. Although Tang Cheung Mou did not give Tang Yau-shing瓦 窯 墩, his naming Tang Yau-shing as the sole collector of the rental from it was nevertheless a favor, because normally the four branches would take turn to collect the rental for a period of time, often one year.  Giving Tang Yau-shing alone the privilege of collecting the rental deprived the other branches of the family a right to do the same according to a rotating schedule, albeit that Tang Yau-shing, being specifically designated as the collector, could enjoy the privilege only during his own life time.

23. Tang Cheung Mou was conscious that granting a special favor to one of his descendents violated his own principle of equity and fairness.  To correct the imbalance he imposed two conditions: (a) 瓦 窯 墩, though being managed by Tang Yau-shing, was to be a part of the property he left behind as ancestral property (其田仍歸嘗業); and (b)  though being the only collector of the rental from瓦 窯 墩, Tang Yau-shing was to “make up the deficit” (補足) and pay the land tax on瓦 窯 墩in full.

24. The first condition is obviously to deny Tang Yau-shing any claim of ownership of瓦 窯 墩.  The reason for the second condition is less clear.  What deficit was Tang Yau-shing to make up?  An explanation is necessary.  It is because瓦窯墩was made ancestral worship property, the tax on it should be paid by the four branches in equal shares.  But because Tang Yau-shing alone was to collect the rental from the land the other three branches were under no obligation to pay their shares, and therefore there would be a deficit.  For this reason Tang Cheung Mou felt necessary to bid Tang Yau-shing to make up the deficit.  This bidding was to make the grant of a privilege to Tang Yau-shing less unfair.

25. For the purpose of making these conditions absolutely clear and avoiding any possible misunderstanding, The “bidding” said after stating the conditions: “This is a specific note to make it clear” (特此註明).  And again it said: “This is to demonstrate equity and fairness.”

……

27. The “bidding” said, instead, that although Tang Yau-shing was to collect the rental from瓦 窯 墩, the land was still ancestral worship property.  By definition ancestral property belongs to a family.  If such property were, under extreme circumstances, to be divided, it had to be distributed to all the branches of the family.  It can never be “given” to a particular member.

28. As if to make absolutely clear his intention Tang Cheung Mou at the end of the “bidding” emphasized that the purpose of all the arrangements was to enable the family members to hold in perpetuity the property left to them by their ancestors and never to lose it (俾得永承先業而勿替焉).  It is clear that Tang Cheung Mou had no intention of letting Tang Yau-shing, or indeed anyone of his descendants, to be the sole owner of any part of the ancestral worship land, including瓦 窯 墩.

29. Thus it is not right to argue that Yau-shing was “given” the ownership of瓦 窯 墩.  As ancestral worship property it was and is owned by Tang Cheung Mou’s family as a whole – all four of its branches have equal interests in it.’

3) The 1976 Succession

12.In 1976, the Land together with other land referred to in the Division of Family was succeeded by and registered in the names of the heads of four Fongs as tenants-in-common having ¼ undivided share each.

4) The basis of the plaintiffs’ claim

13.The basis of the plaintiffs’ claim for an account is that the Land was designated by Tang Cheung Mou (鄧 暢 茂) as ancestral worship land and the income from this Land could only be used for ancestral worship purpose.  The defendant has been collecting rent from tenants who occupy the Land and therefore is under a duty under Chinese law and custom and also by reason of the fiduciary character of the duty imposed under Hong Kong law to give an account.  Alternatively, the defendant as one of the co-owners of the Land is under a duty to give an account of the income and expenditure of the Land.

III. The issue in the plaintiffs’ appeal

1.1)   Ancestral worship trust

14.It can hardly be challenged that Tang Cheung Mou (鄧 暢 茂) had intended to designate the Land for the purpose of ancestral worship and according to Professor Chang, Tang Cheung Mou (鄧 暢 茂) had so designated it.  The issue that has been argued in the plaintiffs’ appeal is whether the formality in setting up the ancestral worship, which has been commonly referred to in the decided cases as ‘ancestral worship trust’ has been complied with. Professor Chang preferred to call the Land designated for such a purpose as ancestral worship land so as to avoid mixing the traditional concept of ancestral worship with the English legal concept of trust.

15.The plaintiffs’ pleaded case (Paragraph 3A of the Re-Amended Reply and Defence to Counterclaim) was that the setting up of the family trust (i.e. the ancestral worship trust) was ‘to take effect from the date of the death of [Tang Cheung Mou (鄧 暢 茂)]’.

16.This remained to be the plaintiffs’ position until the third day of trial when the plaintiffs sought leave to amend their reply to the effect that the ancestral worship trust was to take immediate effect by the Division of Family in 1939.  The Judge allowed the amendment.

1.2) Re Lau Wai Chau

17.One can readily understand the need for an amendment because the Court of Final Appeal in Re Lau Wai Chau (2000) 3 HKCFAR 98 affirmed the lower Courts’ decisions that :

‘ under Chinese law and custom no ancestral worship trust can be created by will for the simple reason that Chinese law and custom does not recognise testamentary dispositions.’ (see page 103 D and H)

18.The Division of Family was the only instrument made by Tang Cheung Mou (鄧 暢 茂) which created the ancestral worship trust and if the ancestral worship trust was to take effect only upon his death, then this instrument would be in the nature of a testamentary instrument and the disposition made thereunder plainly runs contrary to the principle established by Re Lau Wai Chau.

19.However, the amendment would not help the plaintiffs in proving the ancestral worship trust.  They would also need to show that the ancestral worship trust had been formally set up during Tang Cheung Mou’s (鄧 暢 茂) lifetime.  The Court of Final Appeal addressed the issue of testamentary disposition in relation to the setting up of the ancestral worship trust but the first instance decision ([1998] 1 HKLRD 579) which it affirmed, also addressed the issue of the formality in setting up an ancestral worship trust during the ancestor’s lifetime.  The plaintiffs had to meet the requirements that were discussed in the first instance decision of Re Lau Wai Chau where I first summarised the opinion of Professor Dicks (page 590 J - 591 C) :

‘ Professor Anthony Dicks, SC, an expert on Chinese law and custom, said that the wording of the codicil clearly indicated that the intention of the Ancestor was to create from his remaining properties an endowment in perpetuity for the maintenance of ancestral worship. Under customary law, this appeared to be a valid, as well as extremely common, type of provision in a Chinese will of the traditional sort. He said that executors or administrators or trustees who succeeded them, in reliance on it, could properly have had the properties in question registered in the appropriate district office either in the name of the deceased tong or in the name of its linear descendants (ie in one of its own names with the suffix “Tso”), appointing managers in the usual way. In traditional China, the proper method of carrying the deceased’s intention into effect would have been to draw up an agreement between all eight fongs to establish the endowment and to make an official report to the office of the county magistrate in accordance with a decree to that effect of the 18 Year of Qianlong, but in the New Territories these formalities were replaced in effect by registration. But as no such steps had taken place, no ancestral worship trust was created in this case.’

20.I then said at page 591 C-D that,

‘ Although Professor Dicks’ evidence was in relation to the creation of an ancestral worship trust after the death, in my view what he said equally applies to the creation during the lifetime of the ancestor: there was no steps taken to set up such an institution. During his lifetime, no steps were taken to register a tong in respect of the properties intended for ancestral worship.’

21.The opinion I expressed was based on the opinion of Professor  Chang who also gave evidence in that case (page 591 I) :

‘ Professor Chang, the expert for the defendants, stated that in a society with strong Chinese tradition a rich person usually invests his money in land, with a wish that it will be kept forever in the family to be enjoyed not only by himself and other living members but also by his ancestors (to whom he owes his life and good fortune) and his future male descendants (by whom his family line is to be continued).  The land will be his during his life time but will become ‘family property’ after his death - something jointly owned by his male descendants and conceptually attached to his family line.  He can also make his land his ‘family property’ during his life time by designating it as ‘ancestral worship land’ (ji-tian祭田) or ‘family charity land’ (yi-tian義田) or simply ‘family property’ (jia-cai家財), register it under an independent name (usually ‘so and so tong堂’ or ‘so and so dzu (tso) 祖’) and place its management in certain manager or managers (si-li司理).  A tong or dzu (tso) can also be created by group of people to commemorate a common ancestor.’  (emphasis added)

1.3) The new evidence

22.There was no evidence in the present case that formalities such as registration of a Tong or a Tso and appointment of managers had been observed during the lifetime of Tang Cheung Mou (鄧 暢 茂).  In order to overcome this difficulty, the plaintiffs sought leave from the Judge to introduce Professor Chang’s Second Supplemental Report dated 25 March 2013 which stated that such formalities did not need to be observed during the lifetime of Tang Cheung Mou (鄧 暢 茂).

23.The application was objected to by the defendant who argued that the new evidence would cause an adjournment of the trial because the defendant would need to adduce expert opinion to respond to the plaintiffs’ new case.  The Judge refused to admit the plaintiffs’ new evidence.  Without this new evidence the plaintiffs’ case on the ancestral worship trust that was to take effect during Tang Cheung Mou’s (鄧 暢 茂) lifetime was doomed to fail.  The plaintiffs in this appeal also challenge the Judge’s decision to refuse to admit their new evidence.

24.Mr K M Chong (together with Mr Aidan Tam) counsel for the plaintiffs, accepted that the Judge’s refusal was an exercise of discretion but argued that the discretion was wrongly exercised because Chinese law and custom is a matter of foreign law which needs to be proved by evidence.  Further, the defendant had chosen not to adduce any expert evidence when the trial began.

25.I disagree with Mr. Chong’s submission.  In a clear and comprehensive judgment the Judge first pointed out that :

‘ 48. Moreover, as Chinese law and custom is part of the law of Hong Kong, the court can find this law either in the form of expert evidence or in textbooks and judicial decisions (Re Tse Lai Chiu, deceased [1969] HKLR 159 at 175, per Hogan CJ; Tang Yau Yi Tong & anor v Tang Mou Shau Tso & ors [1995] 2 HKC 245 at 252A-D; Fan Kam Ching v Yau Shiu Hing [1986] HKDCLR 14 at 17).’ (emphasis added)

26.As the first instance decision of Re Lau Wai Chau had already held that formal validity in setting up the ancestral worship trust must be observed during the lifetime of the person who wished to have a part of the family land designated for ancestral worship purpose, the plaintiffs ought to have obtained evidence before the trial to address this issue.  They did not do so.  But more importantly, the plaintiffs, until they changed their course, had chosen to advance their case on the basis of the ancestral worship trust taking effect on Tang Cheung Mou’s (鄧 暢 茂) death. This was also made clear in the directional order of Master Ko who ordered the plaintiffs to adduce expert evidence on ten issues.  The one that was relevant is Item (6) :

‘ (6) Whether, under Chinese law and custom, the Division of Family constituted the setting up of a family trust in respect of the said land lot taking effect from the date of the death of the said Tang Cheung-mou.’ (emphasis added)

27.In the light of the Court of Final Appeal judgment in Re Lau Wai Chau, the plaintiffs were bound to fail on this issue and the defendant did not have to resort to expert opinion to meet this point.  Hence the defendant had always made clear his position (as embodied in Master Ko’s order) that no expert opinion will be adduced by him.  It became a different story when the plaintiffs sought to set up a new case half way in the course of trial.  The defendant was clearly justified to oppose the plaintiffs’ attempt to adduce new evidence at that stage.  The Judge clearly was correct in refusing the plaintiffs leave to adduce the new evidence so as not to derail the progress of the case.

28.In my view the plaintiffs fail in their challenge on the Judge’s view on the ancestral worship trust.

2) Discharge and Estoppel

29.The Judge also held that even if the ancestral worship trust had been validly set up, it was discharged by the 1976 registration of the four Fongs as tenants-in-common of the Land.  In view of my conclusion on the invalidity of the ancestral worship trust, it is not necessary for me to address this issue which was also challenged by Mr Chong.  Likewise, it is not necessary for me to address the finding of estoppel by the Judge, namely, since 1976, the four Fongs had acted on the common assumption that the Land would not be subject to an ancestral worship trust and that the plaintiffs are estopped from asserting any claim to the Land. 

3) Relief

30.I will address the plaintiffs’ case on relief after I have dealt with the defendant’s case on adverse possession.

IV. Adverse possession

1) The Judge’s view

31.The Judge upheld the defendant’s counterclaim for adverse possession of the plaintiffs’ ¼ share of the Land on the basis that the defendant and his father Tang Yau Shing (鄧 佑 盛) had been collecting rent from the Land since 1978 for their own use and benefit without rendering any account to anyone and the plaintiffs and their father had been ousted from possession of the Land as a co-owner.

32.Mr Erik Shum (together with Ms Percy Yue), counsel for the defendant, relied heavily on Doe v. Prosser (1774) 1 Cowp 217 which was applied in Hong Kong in Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528.  The Judge relied on Prosser in finding that there was ‘presumed actual ouster’ of the plaintiffs.

2) My view

33.In my view the Judge was wrong on her finding on adverse possession.

2.1) The principles

2.1.1)  Possession by co-owners

34.The starting point is that the possession of one tenant-in-common ‘A’, in his capacity as tenant-in-common, can never bar the other co-tenant ‘B’, because such possession is not adverse to B’s rights, but in support of their common title.  By paying B his share, A acknowledges B as co-tenant.  A’s refusal to pay B his share is not by itself sufficient, without denying his title: Prosser at page 1053. 

2.1.2) Requirements of adverse possession

35.The other equally important principle as laid down in the well-established case of Powell v McFarlane [1979] P & CR 452 at 470 is that if the law is to attribute possession of land to a person who can establish no paper title to possession, he must be shown to have both factual possession and the requisite intention to possess.  Factual possession signifies an appropriate degree of physical control.  It must be a single and conclusive possession.

2.2) Prosser

36.In Prosser, one tenant-in-common ‘A’ had been in sole possession of some pieces of land for nearly 40 years without any claim or demand by person or persons claiming under the other tenant-in-common ‘B’ who had died nearly 40 years before.  Lord Mansfield dealt with the case at first instance.  The report set the scene.  After reciting the facts, Lord Mansfield said :

‘ No actual ouster was proved, but upon the circumstances, I left it to the jury to say, whether there was not sufficient evidence before them to presume an actual ouster; and supposing there was an actual ouster, in that case, the lessors of the plaintiff were barred by the Statute of Limitations. The jury found that there was sufficient evidence to presume an actual ouster.’

37.One can see immediately that Lord Mansfield had not dispensed with physical dispossession of the co-owner.  He recognized ‘actual ouster’ but simply let the jury to decide whether to presume actual ouster on the facts of the case.  ‘Actual ouster’ are simple words, they mean no more than dispossession in modern parlance.  Prosser is not a case which dispensed with the twin requirements of adverse possession, namely, actual physical possession and intention to possess but is concerned with whether, on the facts of the case, dispossession of the other co-owner can be inferred or presumed.  The part of the judgment of Lord Mansfield (who also presided at the further hearing challenging the original decision) which stated that :

‘ But if, upon demand by the co-tenant of his moiety, the other denies to pay, and denies his title, saying he claims the whole and will not pay, and continues in possession; such possession is adverse and ouster enough. The question then is, whether the possession in this case, after the death of [A’s husband] in the year 1734; that is, after the particular estate ended, was a possession as tenant in common, eo nomine or adverse?’

must be properly considered in its context because as he had said :

‘ but in this case no evidence whatsoever appears of any account demanded, or of any payment of rents and profits, or of any claim by the lessors of the plaintiff, or of any acknowledgment of the title in them, or in those under whom they would now set up a right. Therefore I am clearly of opinion, as I was at the trial, that an undisturbed and quiet possession for such a length of time is a sufficient ground for the jury to presume an actual ouster, and that they did right in so doing.’

38.Other judges, namely Aston J, Willes J and Ashhurst J all emphasized the point that the jury’s decision was a decision based on the circumstances of the case.

2.3) Proof of actual ouster or dispossession

39.I have to disagree with the Judge’s acceptance of Mr Shum’s submission below that where a co-owner is claiming adverse possession against the other co-owner, it is not necessary to prove actual ouster or dispossession.  The Judge had simply relied on the fact that the defendant and his predecessor had collected and received all the rent to their own use and benefit without accounting to the plaintiffs since 1978.  In his evidence, the defendant expressly disavowed having any intention to eject the plaintiffs from the Land and possess the Land himself.  But even without this evidence, the important evidence of the plaintiffs’ assertion of their possession was that of the visits by one of the plaintiffs who entered the Land and parked his car there without payment.  The Judge did not reject this evidence but held that it was irrelevant based on the erroneous view at paragraph 112 that ‘the presumed actual ouster is not concerned with physical eviction’.  The error is compounded by failing to recognize that in respect of possession by the paper title owner, the slightest acts done by him will be found to negative discontinuance of possession because an owner who has the right to possession of land will be readily assumed to have the requisite intention to possess, unless the contrary is clearly proved : Powell at page 472.

40.I do not see how the case of Sze To Chun Keung v Kung Kwok Wai David [1997] 1 WLR 1232 cited by Mr Shum can assist him.  In that case the Government mistakenly thought that it owned a piece of land and allowed the defendant to occupy it upon payment of a fee.  The land actually belonged privately to the plaintiffs.  It was held that the Government possessed the land through its licensee i.e. the defendant and the Government’s possession was adverse to that of the plaintiffs.  In the present case while the Land was occupied by a tenant of the defendant, he still has to show that his possession, through the tenant, is adverse to that of the plaintiffs who are co-owners of the Land.  In my view, the defendant had failed to do so.

V.   Relief sought by the plaintiffs

1) Injunctive relief

41.While the plaintiffs have failed to establish the ancestral worship trust, the fact remains that they are the co-owners of the Land.  It sought injunctive relief to prevent the defendant from letting out the Land for an unauthorized purpose.  In my view the plaintiffs failed on the simple ground that they did not adduce sufficient evidence before the Judge to show that the breach had continued up to the trial.

2) Accounts

2.1) Bases of the relief

42.The plaintiffs in their Statement of Claim asked for an account from the defendant of the rent and expenses of the Land on the following bases :

‘ 10. It was the duty of the Defendant both under Chinese law and custom and, by reason of the fiduciary character of the duty imposed upon the Defendant, under Hong Kong:-

(a) to give an account of the income and expenditure of the said land lot to members of the Tang family set out in the Schedule hereof whenever required of him; and

(b) to protect the said land lot from being used for any purpose which might affect the interest of the Tang family inclusive of the 1^st and 2^nd Plaintiffs.

11. Alternative to Paragraph 10 above, as one of the co-owners of the said land lot, it was the duty of the Defendant:-

(a) to give an account of the income and expenditure of the said land lot to the 1^st and 2^nd Plaintiffs who, being co-owners thereof, have rights and entitlements therein; and

(b) to protect the said land lot against use for any purpose which might affect the interest of the 1^st and 2^nd Plaintiffs, as co-owners thereof.’

2.2) The Judge’s reasons

43.In respect of the first basis, the Judge held that it failed because the plaintiffs had failed to establish the ancestral worship trust and also the Court would not recognize a hybrid of Chinese customary law and Hong Kong law.  In Re Lau Wai Chau at 106 A-C, Bokhary PJ held that :

‘ By the very nature of ancestral worship trusts, therefore, Chinese law and custom simply did not operate so as to create an ancestral worship trust in the present circumstances. But the appellants submit that Hong Kong law has nevertheless done so. I am unable to accept that submission.

In my judgment, our jurisprudence leaves no room for Hong Kong law to operate so as to create an instance of a Chinese law and custom institution in circumstances where Chinese law and custom itself does not so operate.  That would amount to the Hong Kong courts assembling a hybrid between Hong Kong law and Chinese law and custom, and then applying that hybrid in the name of, but contrary to, Chinese law and custom.  I can see no juridical foundation for such an exercise.’

44.In respect of the second basis, the Judge held that :

‘ 96. In §11 of the Statement of Claim the Plaintiffs plead an alternative case that “as one of the co-owners of the said land lot”, the Defendant was under a duty to give an account of the income and expenditure of the Land to the Plaintiffs who, as its co-owners have “rights and entitlement therein”, and to protect the Land against being used for any purpose which might affect the interest of the Plaintiffs.

97.   In his opening submissions, Mr Chong acknowledges that co-owners is not generally regarded as being a settled category of fiduciary relationship, but submits that the fact that the Plaintiffs and the Defendant, being co-owners of the Land, “coupled with the duty imposed upon [the Defendant] to manage the Land Lot for ancestral worship purpose, makes [the Defendant] a fiduciary to the beneficiaries of the Tang family including [the Plaintiffs]”.  This again is a hybrid of Chinese customary law and Hong Kong law which I have already rejected as lacking proper juridical foundation.

98. No submission is made by the Plaintiffs in support of their pleaded case that the Defendant’s right as co-owner per se is sufficient to give rise to a duty to account.’

3) My view

3.1) The defendant is liable to account

45.I agree that if the plaintiffs are unable to establish the ancestral worship trust, then the plaintiffs cannot rely on the fact that the defendant and his predecessor had been impressed with the duty of a trustee of such a trust which would require them to render an account of the income and expenditure in respect of the Land in connection with ancestral worship.  However, I disagree that the failure of the ancestral worship trust would by itself preclude the defendant from rendering an account at all.

3.2) Principles on co-ownership and account

46.The starting point of the discussion is that tenants-in-common do not ordinarily owe fiduciary duties : Snell’s Equity, 32^nd Ed, paragraph 7―006. However, irrespective of any fiduciary relationship, the duty by a co-owner to account to another co-owner for rent received by him arises where there is an agreement making him the bailiff of the other.  Chen Yu Tsui v Tong Kui Kwong [2006] 1 HKC 23, which contained a detailed discussion of the circumstances where the duty to account between co-owners arises, referred at paragraph 87 to Sir Edward Coke’s Commentary On Littleton (1823) at 172a and 200b, as cited in Henderson v Eason (1851) 17 QB 701, 707-8, 117 ER 1451, 1453 :

‘ If there be two joint tenants or tenants in common of land, and the one make the other his bailiff of his moiety, he shall have an action of account against him as bailiff, and so are the books to be intended, that speak of an action of account in that case.

But although one tenant in common or joint tenant without being made bailiff take the whole profits, no action of account lieth against him; for in an action of account he must charge him either as guardian, bailiff, or receiver, as hath been said before, which he cannot do in this case, unless his companion constitute his bailiff.’

47.In Kennedy v De Trafford [1897] AC 180 at 186, Lord Herschell dealing with the situation of two owners where one had collected rent from the land they owned :

‘ ……Dodson was an owner of this property―the owner of an undivided moiety, it is true, but each owner of an undivided moiety is none the less truly an owner―and Dodson in collecting those rents and profits collected them in the right which he possessed as a co-owner of the property. He did not need agency or the appointment of agent to justify him in collecting those rents. If nothing had ever passed between the two co-owners which constituted an authority from the one to act for the other, his right to collect those rents would not have been one jot or one title less than it was. No doubt an arrangement was come to that these rents when collected were to be paid into a bank upon which both the co-owners were to draw, but that was an arrangement that might have been put an end to at any time. It was merely an arrangement which was come to by voluntary agreement between the two co-owners. Each co-owner would have an obligation to account to the other in respect of any rents he collected or moneys he received under it.” (emphasis added)’

48.See also Wing Ming Garment Factory Ltd v. Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52.

3.3) The present case

49.Although Mr Chong had not addressed these principles to the Judge, this is not fatal to the plaintiffs’ claim because this is not an issue which requires further evidence to be adduced.  In the present case, the defendant expressly accepted that the authority to collect rent (by his father and later by him) from the Land came from the Division of Family.  The wording was clear : Tang Yau Shing (鄧 佑 盛) was assigned to collect rent from the Land.  In my view even without the existence of the ancestral worship trust, Tang Cheung Mou (鄧 暢 茂) in 1939 and later the four Fongs in 1976 must have charged the defendant’s father and later the defendant as the bailiffs of their undivided share of the Land and as such the defendant must render an account.  This came from the clear wording of the preamble and this state of affairs continued when the four Fongs came to succeed the Land in 1976 as co-owners.

50.Mr Shum relying on Wing Ming Garment Factory Ltd v. Wing Ming Industrial Centre (IO) paragraph 204 argued that the defendant’s duty to account must be subject to the application of the limitation period.  But limitation was never pleaded or raised by the defendant at the trial.  I do not see how this matter can be raised now.

Conclusion

51.The plaintiffs’ appeal must be allowed and the judgment below set aside.  Further there will be judgment for the plaintiffs for an account and inquiry of the income and expenditure received and incurred by the defendant of the Land and payment to the plaintiffs of money (if any) due to them in respect of their share of the Land after taking the account and inquiry.

VI. Costs

52.There will be an order nisi that the plaintiffs are entitled to half of their costs of the appeal and below.  The Court will grant certificate for one counsel only both for the appeal and below.

Hon Yuen JA :

53.I agree with the judgment of Cheung JA.

Hon Chu JA :

54.I agree with the judgment of Cheung JA.

Mr K M Chong and Mr Aidan Tam, instructed by Arthur Au & Co., for the 1^st and 2^nd plaintiffs

Mr Erik Shum and Ms Percy Yue, instructed by Wong, Hui & Co., for the defendant