Money paid on the resumption of land held for purposes of ancestral worship is subject to the same trusts

In Tang Che Tai v Tang On Kwai ([2008] HKEC 143, CA) land held by a certain Tong had been resumed by the government. The question arose as to whether the compensation received was subject to the same trust (governed by Chinese law and custom) as the land had been. If so, then the unanimous consent of all of the members would be needed to any distribution. The further question then arose as to whether the members of the Tong could contractually vary the terms of the trust (an agreement had been entered into in a 1982 members’ meeting providing that compensation monies would be divided between the members).

The Court was unanimously of the view that the compensation money was subject to the same trusts as the original land had been and that the special treatment afforded to Chinese customary trusts by section 13 of the New Territories Ordinance also applied to the compensation money. Distribution of the money could only be carried out in accordance with Chinese law and custom. Expert evidence showed that the agreement entered into in 1982 between the members of the Tong could not effectively vary the terms of the trust; it would not have that effect under the relevant Chinese law and custom.

Johnson Lam J. pointed to articles 8 and 18 of the Basic Law. Article 18 provides for the continuing application of the laws previously in force. These, by virtue of article 8, include customary law. The previous law had included English law ‘except where the same shall he inapplicable to the local circumstances of the said Colony, or of its inhabitants’ (Supreme Court Ordinance 1844, s.3 and the Application of English Law Ordinance 1966). This resulted in the disapplication of the rule against perpetuities as regards Chinese customary trusts since it would destroy them. (85])

‘Hence, Chinese customary law should continue to apply to a Tso or Tong that originally held land in the New Territories after the land had been changed to other form of assets.’ ([88]).

There was also a dispute as to the legitimacy of paying pai ji (sums for the relief of poverty) even though the making of such payments had begin only recently and was approved by a majority (but not by all) of the heads of the fongs. It was held that such payments were not in accordance with the terms of the trust unless made with the unanimous consent of the members of the Tong (or the heads of the fongs on their behalf) and an injunction was granted to restrain any further such payments.

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