MA WAH YAN AND ANOTHER v. DHARMA REALM BUDDHIST ASSOCIATION, INC. AND OTHERS

HCA 1190, 1191,
1192 and 1193/2007

[2021] HKCFI 257

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 1190, 1191, 1192 AND 1193 OF 2007

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BETWEEN

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AND BETWEEN

(By Counterclaim)

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(Consolidated by the Order of Master J Wong dated 18^th July 2012)

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D E C I S I O N

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A. INTRODUCTION

1.  This decision on enforcement should be read with the judgment handed down on 3 August 2016 (“Judgment”), and all abbreviations therein are adopted. 

2.  By the Judgment, this Court declared that the Happy Valley Property and Lantau Properties (“the Two Properties”) were subject to a public charity for the advancement of Buddhism and did not form part of the estate. This Court declared that the Nathan Road Property formed part of the estate and ordered D1 to deliver vacant possession to the Plaintiffs within 3 months from the date of the Judgment; and D1 had to pay damages of HK$1,255,200 and mesne profits at the rate of HK$170,400 per annum from 7 June 2016 until D1’s delivery of vacant possession. 

3.  D1 appealed against that part of the Judgment relating to the Nathan Road Property but the appeal was dismissed by the Court of Appeal on 24 January 2019.

4.  D1 did not deliver vacant possession of the Nathan Road Property.  The Plaintiffs invoked the bailiff’s assistance to recover possession on 20 January 2020.  D1 paid costs to the Plaintiffs but did not pay the damages and mesne profits as ordered.

5.  Pursuant to this Court’s order dated 3 February 2017 (“2017 Order”), SJ and D1 set up a new company called Dharma Realm Buddhist Association (Hong Kong Branch) Company Limited (“Newco”) to hold the Two Properties.

6.  The Plaintiffs took out the present summons on 11 May 2020, amended on 27 July 2020, for various reliefs:

(1) That D1 do within 21 days from the date of the order pay a sum of HK$1,872,550,82 being the damages in respect of the Nathan Road Property, with interest as ordered; and HK$6,600 being agreed costs as ordered by Master Roy Yu dated 5^th September 2019 (“order to pay”);

(2) Should D1 fail or neglect to pay the above sums, the Plaintiffs shall be at liberty to enforce the Judgment by resorting to the Two Properties and

(i) sell any or both of them and use the proceeds of sale to satisfy the sums in §(1) (“Judgment Sums”) and costs of this application and pay the balance to Newco (“order to sell”); or

(ii) charge the Judgment Sums together with costs of this application against the Two Properties after transferring the Two Properties to Newco by way of gift, notwithstanding that Newco is not a party to these proceedings and is in law a separate legal entity from D1 (“order to charge”).

7.  The summons stated that the application was taken out pursuant to Order 45, rules 1 and 9, Order 50, rule 1 of the Rules of the High Court, Cap 4A and the inherent jurisdiction of the Court.  The further arguments of the Plaintiffs upon amendment to the summons rely on the Court’s power to approve ex gratia payments from charitable funds under the principles of Re Snowden and Re Henderson [1970] Ch 700.

8.  D1 and SJ share the same views on legal principles – that there are simply no statutory bases for the Court to impose a charge and there is only jurisdiction to order a sale in enforcement of a charging order.

9.  SJ further submits that if the Court has any inherent jurisdiction to impose a charge, it should not be exercised in favour of the Plaintiffs.

10.  I shall analyze each order sought in turn, and then consider the question of inherent jurisdiction.

B. ORDER TO PAY

11.  There were already orders requiring D1 to pay.  I fail to see why the Court needs to make the same orders again.

12.  D1 did not dispute the amount of the Judgment Sums.  However, Mr Kee, counsel for D1, puts forth 2 lines of argument:

(1) He was instructed that D1 should not be liable to bear mesne profits from the date of the Judgment because the Nathan Road Property had been handled and managed by one Mr John Man pursuant to a power of attorney from Priest To Lun, but not by D1. See paragraph 111 of the Judgment.

(2) The remedies for enforcement have been laid down in Order 45, rule 1, RHC.  The Plaintiffs should have resorted to those instead of issuing the present summons.

13.  The first line of argument, without disrespect, has no merits.  The instructions to counsel were not only irrelevant but contradictory to D1’s stance at the trial.  D1 had claimed to be in actual or constructive possession of the Nathan Road Property (§13 of the Judgment). The Judgment in respect of that Property was directed at D1, not John Man.  D1 has appealed against that part of the Judgment and lost.  D1 must pay.

14.  However, I agree with the second line of argument.  Under Order 45, rule 1, the Plaintiffs could have used, at least, a writ of fieri facias or garnishee proceedings against D1.  And yet as of the date of the summons, the Plaintiffs has not even attempted to do any of those.

C. ORDER TO CHARGE

15.  It is logical to deal with the order to charge first before an order to sell in view of paragraph 8 above.  The power to grant an order to charge should be considered under 3 limbs:

(1) Section 20A of the High Court Ordinance (Cap 4) (“HCO”);

(2) Order 45, rules 1 and 9; and

(3) The court’s power to approve ex gratia payments out of charity funds under the principles of Re Snowden and Re Henderson.

C1. Section 20A of HCO

16.  Section 20A(1) of HCO authorizes the Court to impose a charge:

“(1) Subject to subsection (3), a charge may be imposed by a charging order only on—

(a) an interest held by the debtor beneficially—

(i) in any asset of a kind mentioned in subsection (2) [ie land, securities or funds in court] or

(ii) under any trust; or

(b) an interest held by a person as trustee of a trust (in this paragraph referred to as the trust), if the interest is in an asset of a kind mentioned in subsection (2) or is an interest under another trust and—

(i) the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust;

(ii) the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit; or

(iii) in a case where there are 2 or more debtors all of whom are liable to the creditor for the same debt, they together hold the whole beneficial interest under the trust unencumbered and for their own benefit.

17.  In respect of section 20A(1)(a), a judgment creditor has to verify, by affirmation, that the interest to be charged is owned beneficially by the judgment debtor: Order 50, rule 1(3)(d).

18.  Plainly, the Plaintiffs are unable to so verify because the Two Properties are not beneficially owned by D1 but the public charity.  In his submission dated 23 June 2020, Mr Miu, counsel for the Plaintiffs, has conceded that the beneficiary was not D1.  There is no dispute that there is no identified beneficiary such that the Plaintiffs/the Court needed to hear his/her views, apart from the representations from SJ.

19.  As regards HCO s.20A(1)(b), only limb (i) is applicable.  A charging order can be imposed against the defendant as trustee of the trust where the liability was incurred by virtue of the bare legal ownership of the property in question together with the concomitant rights necessary for its enjoyment (ex hypothesi authorised by the trust): Beckenham MC Ltd v Centralex Ltd [2004] EWHC 1287 (Ch), §§30-31.

20.  Applying Beckenham,

(1) D1 has never been the legal owner of the Nathan Road Property; and

(2) The Judgment Sums cannot be remotely considered as incurred for the enjoyment of the public charity or the Two Properties.

21.  Therefore, no charge can be imposed upon the Two Properties according to section 20A HCO against D1.

C2. Order 45, rules 1 and 9

22.  The Plaintiffs submits that Newco is in substance the alter ego of D1.  An order to charge can be imposed on it, notwithstanding that it had not come into existence when the Judgment was handed down.  The Plaintiffs rely on Order 45, rules 1 and 9, RHC and Sam Ming City Forestry Economic Co & anor v Lam Pun Hung & anor unrep., CACV 279 of 2000, 27 June 2001.

23.  I am unable to accept that Newco is the alter ego of D1.  Under §§2 and 3 of the 2017 Order, Newco’s Memorandum and Articles of Association and the composition of the first board of directors were subject to comments and approval of SJ, acting as a protector of the public charity.  Newco was only incorporated on 7 January 2020 for holding the Two Properties as a trustee for the advancement of Buddhism.  Newco has never been in possession of the Nathan Road Property and the Judgment Sums were not incurred by it.

24.  As for Order 45, rule 9, it provides that:

“Any person, not being a party to a cause or matter, who obtains any order or in whose favour any order is made, shall be entitled to enforce obedience to the order by the same process as if he were a party.” (underline added)

25.  I am unable to see how this rule assists the Plaintiffs.  It is Newco who was a non-party.  Newco does not seek to enforce the Judgment.  Order 45, rule 9 has no application.

26.  The position of P2 in Sam Ming City illustrated my point.  A judge refused to set aside an ex parte order granting leave to Ps to enforce a Mainland arbitration award against Ds and gave judgment in favour of P2.  D2 appealed. The Court of Appeal dismissed the appeal and upheld the judge’s decision that P2, who was not a party to a Mainland arbitration proceedings but was the sole beneficiary of the Mainland arbitration award, may enforce it in Hong Kong pursuant to s.40B(2) of the Arbitration Ordinance, Cap 341.

C3. The Court’s power to approve ex gratia payments from charitable funds under the principles of Re Snowden

27.  The Plaintiffs rely on Re Snowden to invite the court to order charity trustees or SJ to make a voluntary payment out of the Two Properties or their sale proceeds to meet the Judgment Sums pursuant to a moral obligation.  Cross J dealt with the estates of Snowden and Henderson in Re Snowden.

28.  In Re Snowden, the testator left his shares to 3 legatees and the residuary estate to some charities.  The testator sold the shares in his lifetime, with the result that the charities received so large a gift under the will which the testator might have never intended to give. Six charities voluntarily gave up part of their shares in the residuary estate in favour of the 3 legatees. 

29.  In Re Henderson, the testatrix made a holograph will with pecuniary gifts to K and A.  At some date, which could not be identified as having been before or after execution of the will, the testatrix added in red ink the words “or ½ each of my shares” to the right of the names of K and A in the will.  The will as proved did not contain the words in red ink.  The administrator sought directions as to whether the gifts to K and A might be increased and paid out of the residuary estate, such that the gift to charity would be reduced from £6,500 to some £1,500.

30.  The applications by the executor/administrator was to give effect to the wishes of the charities and the legatees.  The Attorney-General (“AG”) had no objection in both cases.

31.  Cross J held that the court and the AG had power to authorize charity trustees to make ex gratia payments out of funds held on charitable trusts. It was, however, a power which was not to be exercised lightly or on slender grounds but only in cases where it could be fairly said that, if the charity were an individual, it would be morally wrong of him to refuse to make the payment. (at 710F-G)

32.  Cross J illustrated his holding further:

“An honourable man when satisfied that part of a legacy which he has been paid was not intended by the testator for him at all but for someone else, and that it has only come to him through some oversight or legal technicality, would certainly feel under a moral obligation to hand that part over to the person who was intended to have it”. [1^st category] On the other hand, if a testator in the exercise of his legal right to dispose of his property as he likes chooses to give his estate to A rather than to B the fact that B is bitterly disappointed and considers that the testator acted very wrongly is not in itself a reason why A should feel under a moral obligation to hand over the estate or any part of it to B. [2^nd category] I do not of course, mean to say that there can never be cases in the second category in which an ex gratia payment out of charity funds would be justified; a case in which it would, perhaps, be justified might be where the testator in making the gift to a charity was breaking a solemn, though legally unenforceable, promise to leave it to someone else … But I think that the cases in which ex gratia payment would be justified would be rarer in the second category than the first.” (at 710H-711B)

33.  Cross J approved the applications on the bases of the testator/testatrix’s perceived intentions under the will.

(1) In Re Snowden, he found it highly likely that the testator overlooked the effect which the sale of the shares had on his testamentary dispositions and that if he had realized the effect of the sale, he would have left pecuniary legacies of a substantial amount in order to compensate the 3 legatees for the loss of the shares (at 707H-708A).

(2) In ReHenderson, he found it probable that by the red ink addition, the testatrix intended to indicate that if her shares were worth more than £6,000, the two legatees were to share the excess and that she did not contemplate that so large a sum as £6,500 would pass under the words “anything over for charity” (at 708C-D).

34.  Re Snowden and Re Henderson are plainly distinguishable from the present case:

(1) The Judgment and the 2017 Order cannot be compared to a will.  In Re Snowden and ReHenderson, the charities received so large a gift from the will which the testator might have never intended to give. In the present case, the Judgment was reached after consideration of the law and facts to declare that the Two Properties came under a public charity.  The 2017 Order was to implement the Judgment as regards the Nathan Road Property.  There was no and could not be any challenge to the “intention” of the Judgment or the 2017 Order.

(2) Unlike Re Snowden, the public charity has never intended to make ex gratia payments to the Plaintiffs.  In fact, there was no evidence of the Plaintiffs or D1 ever approaching SJ for that purpose.

(3) The Judgment expressly found that the Nathan Road Property was not used for the advancement of Buddhism (§110). Even if the concept of moral obligation is applicable here, there is no moral obligation on the charity (set up for the purpose of advancement of Buddhism) to assist D1 to settle the Judgment Sums. 

(4) D1’s conduct was in breach of the Judgment.  Even on moral grounds, the charity should not aid and abet such breach.

(5) Re Snowden, at best, only dealt with payment out of charity funds.  It did not order a charge or sale of properties that were subject to a public charity.

35.  In summary, none of the bases in support of an order to charge are established.  I refuse to grant an order to charge.

D. ORDER TO SELL

36.  Under section 20B(3) of the HCO:

“a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.”

37.  The remedy under an equitable charge under hand is sale: Hong Kong Civil Procedure 2021, Vol 1, §50/9A/18.

38.  There appears no basis for this Court to consider an order to sell ahead of the imposition of a charging order. As there is no legal basis for the imposition of a charging order, there is no need to consider an order to sell.

39.  Mr Miu submits that a judgment creditor who has obtained a charging order will need an order to sell but a trustee does not need such an order. All that the trustee needs is the Court’s sanction about the way that he proposes to deal with the proceeds of sale of the trust property.

40.  With respect, the trustee (whether Mr Miu meant SJ or Newco) has not proposed to sell or deal with proceeds of sale of the Two Properties. There is nothing for the Court to sanction. 

41.  Further, the Judgment declared that the Two Properties and not their proceeds of sale are subject to a public charity for the advancement of Buddhism.  An order to sell, not for the purpose of advancement of Buddhism is against the letter and spirit of the Judgment.

E. INHERENT JURISDICTION

42.  Inherent jurisdiction provides a most useful source of procedural law which the Court may draw upon as necessary whenever it is just or equitable to do so: Halsbury’s Laws of England, 5^th ed, Vol 11, §23.  It is difficult to formulate a formula for its application.  Factors which affect the exercise of inherent jurisdiction include the facts of the case, the type of order which the court seeks to protect or enforce, the conduct of the parties and the court’s perception of where the balance of justice lies. Ultimately, it is an exercise of the Court’s discretion.  The phrase “fairness, necessity and proportionality” says it all: Falcon Private Bank Ltd v Borry Edouard Charles Ltd & anor [2013] HKEC 962, HCA 1934/2011, §§18-19, To J.

43.  In Falcon Private Bank, To J ordered that unless the defendant paid the plaintiff’s costs of HK$3 million ordered in 2 previous hearings, the defendant’s defence be struck out and judgment be entered in favour of the plaintiff in the sum of US$10 million.

44.  InJSC BTA Bank v Ablyazov (No. 8) [2013] 1 WLR 1331, the defendant was found to be in contempt of court for breaching disclosure orders and lying under cross-examination.  He was sentenced to 22 months’ imprisonment but had absconded.  On the application of the plaintiff, the judge ordered that the defendant should surrender himself to custody and file an affidavit disclosing his world-wide assets or be debarred from defending 8 sets of commercial court proceedings.

45.  One immediately notes that the 2 authorities were examples of how the Court invoked its inherent powers to ensure that a recalcitrant defendant complied with court orders and to ensure justice to a plaintiff.

46.  However, the Court may not fall back upon its inherent jurisdiction to circumvent a clear statutory provision.  See Halsbury’s Laws of Hong Kong, §90.0034.

47.  Given the statutory provisions in section 20A HCO above, I do not see any room for the existence of inherent jurisdiction.

48.  Mr Miu submits that the Plaintiffs are invoking the equitable jurisdiction of the Court and he cites various maxims of equity only in his reply submission.  It is not necessary to set out all his arguments.  Suffice it to say that equity is not a weapon that can fend off applicable statutory provisions and established principles.

49.  In any case, the order to charge and order to sell are forms of enforcement of a debt available not as of right but by exercise of the court’s discretion.  If I do have inherent jurisdiction, I bear in mind that it was hostile litigation between the Plaintiffs and D1.  The Plaintiffs ended up with what appeared to be empty judgment against a foreign defendant.  For the following reasons, I would not exercise my discretion in favour of the Plaintiffs to order a charge or a sale.

50.  Firstly, the Plaintiffs have not exhausted all available remedies.  They had not levied execution before issuing the present summons.  It appeared that D1 operated in Hong Kong but there was no attempt to apply for garnishee orders.

51.  Secondly, the Plaintiffs made an informed choice to defer execution.  It was only in the reply submission of Mr Miu that the Court was told that the Plaintiffs had applied for and obtained a combined writ of possession and fieri facias against the Nathan Road Property and Happy Valley Property on 6 November 2019.  They recovered the Nathan Road Property but the writs in respect of the Happy Valley Property were not executed until the day before the reply submission (ie 24 September 2020).  By then, D1 had moved out and the Happy Valley Property has been occupied by another Buddhist lecture hall.

52.  According to Mr Miu, execution of the writ of fieri facias would disrupt and disable operation of the Happy Valley Property as a place of Buddhist worship but with little prospect of substantial financial gain.  As Buddhists themselves, the beneficiaries to the estate found it sacrilegious to sell Buddha statutes or other religious paraphernalia seized in a place of Buddhist worship.  As it has become a subject of criticism (and by that he meant by the Court, D1 and SJ in the course of dealing with this summons), the Plaintiffs attempted to levy execution.

53.  This was giving evidence through written submission.  It was not even clear if Mr Miu’s submission was based on instructions or his own views.  In any case, that submission revealed that the Plaintiffs made a deliberate choice, under legal advice, to delay execution.  They have to bear the consequence of that choice.

54.  Thirdly, and worse still, the execution on 24 September 2020 was in breach of an order for stay of execution made on 24 June 2020.  The Plaintiffs has never applied for uplifting of the stay.  If any maxim of equity is applicable, the one which says he who comes to equity must come with clean hands apply and bars the Plaintiffs from relief.

55.  Fourthly, there was no suggestion that D1 had no means to pay, as D1 had settled part of its legal costs to the Plaintiffs already.

56.  Fifthly, the Plaintiffs could have enforced the Judgment in the United States where D1 is resident.  The fact that the Plaintiffs need to incur extra expenses and time to enforce against a foreign defendant is not a basis to ask the Court to exercise its discretion to order a sale or charge of the Two Properties. In any case, apart from a bare assertion, the Plaintiffs have not said anything about actual difficulty in enforcement in the United States.

57.  Sixthly, to sell properties that come under a charitable trust, the purpose must be for public interest.  Payment of damages on behalf of D1 who breached a court order comes nowhere near public interest.

F. OTHER ORDERS

58.  In the reply submission, the Plaintiffs invite the Court to consider whether the 2017 Order should be implemented or varied.

59.  The Plaintiffs do not challenge the propriety of the 2017 Order but invite to the Court to consider, in the light of events in the last couple of years which led to this summons, whether the Two Properties should be vested, not on Newco but on another charitable Buddhist organization that may be nominated by SJ. 

60.  With respect to the Plaintiffs, they cannot apply to vary the 2017 Order under the “such other directions and orders as the Court may deem fit” limb of their summons.  Still less should they apply only in their submission in reply.  If they want a variation to the 2017 Order, that should be done properly, supported by affidavit.

61.  That said, the Court on its volition will follow up on the implementation of the 2017 Order given D1’s apparent breach of the Judgment.

G. CONCLUSION

62.  This application for enforcement of judgment debts owed by D1 by seeking an order to sell or to charge properties that form the subject matter of a charitable trust is novel and entirely against established principles under sections 20A of HCO, Order 45, rules 1 and 9 of RHC.  Re Snowden and Re Henderson are wholly distinguishable.  There is no inherent jurisdiction in the Court to grant the reliefs sought and even if there is, the facts are against the exercise of discretion in favour of the Plaintiffs.  I therefore dismiss the amended summons.

H. COSTS

63.  On a nisi basis, costs of D1 should follow the event and be borne by the Plaintiffs, to be taxed if not agreed.  The Plaintiffs’ costs should be taxed in accordance with the Legal Aid Regulations.  Costs of SJ should be borne out of the charity, as SJ has been invited by the Court to make submissions.

64.  I thank counsel for their assistance.

Written Submissions by Mr Nelson Miu, instructed by Hobson & Ma assigned by Director of Legal Aid, for the Plaintiffs

Written Submissions by Mr Vincent Kee, instructed by Law Offices of Y.C. Lee, for the 1^st Defendant

Written Submissions by Mr Aaron Lam, Government Counsel for the Secretary for Justice

HCA 1190, 1191,

1192 and 1193/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 1190, 1191, 1192 AND 1193 OF 2007

____________

____________

____________

(Consolidated by the Order of Master J Wong dated 18^th July 2012)

_____________

D E C I S I O N

_____________

1.  By a judgment dated 3 August 2016 made after trial, I made an order nisi for the Plaintiffs to bear 60% of D1’s costs.  The Plaintiffs now seek to vary that order, asking that D1 do bear 100% or a percentage of the Plaintiff’s costs.

Legal principles

2.  Costs should follow the event except when it appears to the court that in the circumstances of the case some other order should be made. Order 62, r 3(2), Cap 4A.

3.  A successful party to an action should not be ordered to pay any part of the costs of the hearing simply because he has failed to prove all of the allegations made.  The successful party should not pay any of the costs unless he has acted improperly or unreasonably in raising issues: Re Elgindata (No.2) [1992] 1 WLR 1207.

4.  There is a discretion in the court to deprive a successful party of the whole or part of his costs because he had caused a significant increase in the length or costs of the proceedings by raising issues on which he did not succeed: Commissioner of Inland Revenue v HIT Finance Ltd [2014] 4 HKLRD 412.  That issue must be something so distinct and separate in itself that the decision of it constituted an “event”.  Hong Kong Civil Procedure 2016, Vol 1, §62/3/3.

Analyses

5.  I notice a sentence in paragraph 130 of the Judgment which might cause misunderstanding.  The reference to “most part of the costs at the trial was spent on the first 2 properties” in fact referred to the Lantau Properties and Nathan Road Property.  Virtually no time was spent on the Happy Valley Property at the trial.

6.  With regard to attempts to settle before action, the Plaintiffs rely on a letter dated 13 April 2012 (“the 2012 letter”), and a series of letters from 29 April to 27 May 2016 (“the 2016 correspondence”).

7.  Mr Chong questions the basis for this court to re-exercise its discretion on costs.  He submits that the parties already had an opportunity to make detailed oral submission on costs in the closing submission at trial.  The court was then provided with relevant without prejudice correspondence. Relying on Ralotte Investments Ltd v The Bauhinia Ltd, HCMP 3388/2013, 4 December 2014, Au-Yeung J, Mr Chong submits that the Plaintiffs should not be permitted to re-run their arguments at trial.

8.  With respect, this line of submission was misconceived.  The substantive matter in Ralotte was the question of costs after the case was settled.  In making a decision, the court based itself on written submissions only and hence an order nisi on costs was made just in case there were loose ends on costs to tie up after the decision.  The applicant mistakenly thought it was an invitation to review the substantive costs decision and it was held not to be justified.  That situation was wholly distinguishable from the present case where the costs order nisi, as usual, was made upon handing down of a judgment when the parties have not yet had an opportunity to consider the judgment.  Ralotte was wholly inapplicable.

The 2012 letter

9.  The plaintiffs suggest that this court had wrongly interpreted the 2012 letter (in §134(a) of the judgment) in that D1 had not in that letter asserted a “public charitable trust”. 

10.  With respect, whilst it was true that D1 had not used that term, D1 had relied on causes of action of “implied charitable trust” (a half-baked case on charitable trust) and common intention constructive trust from the start. There could not be any doubt in a reader’s mind that D1 was challenging the deceased’s beneficial ownership and asserting that he was only a trustee.  The plea on charitable trust was improved in subsequent pleadings.

11.  Even accepting that this court had wrongly interpreted the 2012 letter, the correspondence pertaining to it had been overtaken by events, ie:

(a) Joinder of SJ as a party on 9 March 2016;

(b) Amendments to the defence and counterclaim to plead charitable trust expressly on 10 March 2016 (“the latest amendments”);

(c) Further discovery of material evidence in late March 2016 and service of a witness statement of Madam Fu;

(d) The 2016 correspondence.

The 2016 correspondence

12.  About one month after the further discovery, the Plaintiffs made a Calderbank offer on 29 April 2016 to settle the consolidated action. It was repeated in the open offer on 21 May 2016.

13.  At this hearing, it was established, without objection from Mr Chong, that

(i) The offer not to contest the Happy Valley Property was never withdrawn right up to the trial. 

(ii) The offer not to contest the Lantau Properties was withdrawn on 27 May 2016 before trial and the Plaintiffs lost at the trial. 

(iii) The offer to recover the Nathan Road Property was maintained and the Plaintiffs won at the trial.

14.  For item (i), I maintain my view in §134(b) that D1 had not yet rejected the offer but its approach in asking for the plaintiffs’ basis for concession in the open offer was unnecessary and pedantic.  There was no reason to reject it.  In principle, the Plaintiffs should bear costs only up to 27 April 2016 and D1 should bear the Plaintiffs’ costs including part of the Plaintiff’s counsel brief thereafter.

15.  For item (ii), there are contentions pertaining to the correctness of my decision regarding the Lantau Properties which should be addressed in an appeal.  I make no comments on them.

16.  It was not true that the Plaintiffs’ case rested on construction of the Deed of Gift alone as Mr Miu submits.  The Plaintiffs’ concession that the monastery was a public charity trust was up to the year 1972 only (§85 of the judgment).  They continued to deny that the construction of the monastery came from donations. There was no suggestion from the Plaintiffs’ side that the court need not hear oral evidence.  The trial on the Lantau Properties was inevitable.  In fact much of the trial time was used on this Property.

17.  D1’s evidence on donations did not carry weight.  However, applying the principles in paragraph 3 above, it did was an issue that applied both to the Nathan Road Property and Lantau Properties.  It could not be said that D1 unreasonably raised an issue on donation, or any other issues.

18.  In principle, subject to denial of costs on adducing expert evidence (§131 of the judgment) which was not challenged by either party, D1 should have costs in respect of the Lantau Properties from inception of the case.

19.  In respect of the Nathan Road Property, in principle, the Plaintiffs should get all costs from inception of the case since it had won on its claim.

20.  Mr Miu rightly pointed out that the burden of proof was on D1 as the Plaintiffs knew little about the alleged charity. Substantial proof came in March 2016.  The Plaintiffs acted promptly in offering to settle.

21.  The 3 properties formed 3 distinct parts of the consolidated action.  The parties could have considered each one separately in settlement. Likewise the costs in respect of each Property could be considered separately although some issues (such as the deceased’s intention and the donations) would have overlapped.

22.  The Plaintiffs have not shown that D1 had acted improperly or unreasonably in raising issues.  Nor could it be said that D1 had cause significant increase in trial time.

23.  Having considered the further correspondence placed before me and heard the arguments, I am of the view that I had not sufficiently taken into account the timing of the latest amendments, the further discovery and the extent to which the Plaintiff’s offers could have reduced the trial time if the offers had been accepted.  The Plaintiffs would have been entitled to some costs from the Defendants in respect of the Happy Valley Property and all costs in respect of Nathan Road Property.  Still the overall picture was that the Defendants should be entitled to the bulk of the costs of the consolidated action.

24.  Taking all the circumstances into account and setting off the parties’ costs.  I vary the costs order so that the Plaintiffs shall only bear 40% of D1’s costs (ie net of costs of and incidental to adducing expert evidence).

25.  Since the Plaintiffs have succeeded in varying the costs order, I order that D1 do bear costs of this hearing on party and party basis.  The Plaintiffs’ own costs shall be taxed in accordance with Legal Aid Regulations.  D1’s own costs shall be borne out of the charity’s assets on trustee basis.  The SJ’s costs shall be borne out of the charity’s assets on indemnity basis.

HCA 1190, 1191,
1192 and 1193/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS 1190, 1191, 1192 AND 1193 OF 2007

____________

____________

____________

(Consolidated by the Order of Master J Wong dated 18th July 2012)

___________________

J U D G M E N T

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A.  INTRODUCTION

1.  The core issue in this case is whether or not 4 properties of the deceased were subject to a public charity for the advancement of Buddhism.

B.   THE PARTIES

2.  The deceased (“Priest To Lun”) had various names including TO Lun (度輪), SIK To Lun (釋度輪), Priest To-Lun (度輪法師) and Xuan Hua (宣化).  He died on 7 June 1995, intestate.  He was not married and did not leave any issue.  He was survived by his brother.  The Plaintiffs are the administrators of Priest To Lun’s estate.

3.  The 1^st defendant in the consolidated action (“D1”) is a non-profit organization registered under the laws of California but it is not clear if it has charitable status.  Mr Chong, counsel for D1 accepts that D1 is not a beneficiary to the alleged charitable trust but the “trustee”.

4.  The other defendants have not filed acknowledgement of service.  The trial proceeded in their absence.

C.  UNDISPUTED OR INDISPUTABLE FACTS

5.  The following facts are undisputed or indisputable as being based on documents.

6.  Priest To Lun was born in Mainland China in 1918.  He became a monk in 1937 at the age of 19 and was ordained in 1947.  In 1949, he came to Hong Kong to preach Buddhism.  Two years later, he established the Western Bliss Garden (西樂園) and preached there.

7.  In between 1954 and 1958, Priest To Lun became registered owners of the 4 subject properties, tabulated below:

8.  In February 1959, D1 was incorporated under its former name of “Buddhist Lecture Hall Inc” in California.  Contrary to paragraph 28 of the Amended Defence, Priest To Lun was not one of its founders.  Mr Miu (counsel for the Plaintiffs), however, accepts that Priest To Lun was the spiritual and de facto head of D1 during his lifetime, and that the directors and office holders of D1 were his followers and would obey his commands.

9.  Priest To Lun used to preach at the Buddhist Lecture Hall until he departed for the USA in 1962 to continue preaching there. He had never since resided in Hong Kong except to return on 4 occasions to preach.

10.  On 7 June 1995, Priest To Lun passed away in the USA.

11.  For about 57 years till now, D1 has been operating the Tsz Hing Monastery and the Buddhist Lecture Hall.

D.  ISSUES AND BURDEN OF PROOF

12.  The Happy Valley Property is no longer in issue as the Plaintiffs agreed to judgment being entered for a declaration that it was held on trust for a charitable purpose for the advancement of Buddhism.

13.  As regards the remaining 3 Properties, the core issue remains as set out in paragraph 1 above.  D1 claims to be in actual or constructive possession of all 4 properties, but the Plaintiffs say that D1 was a trespasser.  If D1 is found to be in trespass of any of the 3 Properties, there is no dispute as to quantum of mesne profits.

14.  The plea of “implied trust” is no longer relied on by D1.

15.  The equitable interest in a property follows the legal title.  It is for the party claiming beneficial interest to prove the contrary.  In this case, the burden rests on D1.

E.   LEGAL PRINCIPLES ON CHARITABLE TRUST

16.  According to Cheung Man Yu v Lau Yuen Ching & ors [2007] 4 HKC 314, Tang VP (as he then was), §24, to qualify as a public charity, 3 criteria must be satisfied:

(1)   The purposes of the institution must have charitable character;

(2)   The institution must exist for the benefit of the public;

(3)   The institution must be exclusively charitable.

17.  A gift for the advancement of religion or promotion of public worship is considered as a gift to charity: Li Kim Sang Victor v Chen Chi Hsia & anor, HCA 481/2008, 24 February 2015, Au-Yeung J; Tudor on Charities, 10th ed, §2-110. This applies even if the gift is subject to conditions: Tudor on Charities, §§2-110 & 2-114.

18.  So long as land is held for the purpose that a place of public worship should be built on it, the fact that there was no formal declaration of trust would not prevent a public charity for the advancement of religion from being formed: Cheung Man Yu, §45. 

19.  It did not matter that the keeper of the building built for the advancement of the religion did not know that a charitable trust had been established.  Although subsequent events or conduct might throw light on whether a charitable trust had been established years back, they could not by themselves convert a properly constituted charitable trust, or its assets, into a private trust or private property. When the evidence supports the existence of a charity, the court should not be astute to find otherwise, unless the contrary is shown.  See Cheung Man Yu, §46.

20.  A gift for the benefit or support of clergy or preachers is a charitable object, provided that the gift is for the office-holder for the time being, and not restricted to the individual filling the office at the time: Li Kim Sang Victor, §80.

21.  Mr Miu submits that in ascertaining whether a charitable trust is attached to a transfer of property the court looks only at the intention of the donor(s), and not that of the donee.  This is because if a donee wishes to dispose of property to a charity, he can (and must) do so by writing, as required by section 5(1) of the Conveyancing and Property Ordinance, Cap 219. 

22.  With respect, that submission runs contrary to Cheung Man Yu, §45.  Moreover, the court looks at all the circumstances, not only at the time the charity was purportedly created but also subsequently: Cheung Man Yu: §45.

23.  It should be remembered that facts differ from case to case. Reliance on findings in another case may not be helpful.  I note that in his final submission, Mr Miu no longer relies onLi Kim Sang Victor which in my view is wholly distinguishable on the facts.

F.   CREDIBILITY OF WITNESSES

24.  Madam Madalena Tam Lew (alias Tam Guo Shi 譚果式) (“Madam Lew”), Madam Hedy Fu (“Madam Fu”) and Reverend Heng Sure testified on behalf of D1.  Madam Bai, niece of Priest To Lun, testified on behalf of the Plaintiffs. All of these were honest witnesses.

25.  The defence witnesses were careful in answering questions and would not pretend to know something that they did not know about.  They frankly admitted that some aspects of their evidence was hearsay and that some parts of their witness statements were but their own opinion (eg last sentence of §8 of Madam Lew’s witness statement; and last sentence of §4 of Reverend Heng Sure’s). 

26.  However, not all of Madam Lew’s evidence was correct or reliable.  Paragraph 10 of her witness statement contained a purported quote from what was described as “the Oral Wills” of Priest To Lun:

“I came into the world without anything; when I depart, I still do not want anything, and I do not want to leave any traces in the world. I came from empty space, and I will also return to empty space.”

I place no reliance on that quote because it did not appear in the Oral Wills.  Apparently she was adopting something not laid before the court.

27.  Madam Fu was a credible but not precise witness.  She tended to digress to other matters instead of answering the questions directly.  Most of her evidence was hearsay.

28.  Mr Miu has tried to show collusion between witnesses because of similar contents in the witness statements:

(i)   §8 of Madam Lew’s witness statement and §11 of Madam Fu’s contained the same error in stating that the Tsz Hing Monastery was built on both Lantau Properties when it was not on Lot 5A.  They were not surveyors.  I do not see how that error should affect their overall credibility.

(ii)   §13 of Madam Fu’s witness statement and §8 of Ronald Epstein’s (which was not adduced in evidence) both stated that “putting the matter into the context of the modern legal framework”, Priest To Lun was holding the properties on trust for D1.  However, those were witnesses’ opinion of the law, which was inadmissible anyway.

I am not satisfied that there was collusion or bad faith. 

29.  Unless otherwise specified, I accept the evidence of Madam Lew and Madam Fu.

30.  I am most impressed by Reverend Heng Sure.  He had worked closely with Priest To Lun for 20 years until the latter’s death.  I am satisfied that was truthful and he has accurately stated the teachings of Priest To Lun and Buddhist precepts.  I accept his evidence.

31.  I posed a series of questions to the defence witnesses after the re-examination of each of them.  They gave spontaneous and direct answers, to which I place the greatest weight.

32.  Madam Bai’s evidence was not disputed.  I accept her evidence.  Her indirect knowledge of Priest To Lun, gained through her parents, was consistent with the conduct of Priest To Lun during his lifetime and the evidence of defence witnesses.

G.  ADMISSIONS OF PRIEST TO LUN AGAINST INTEREST

33.  In his final submission, Mr Chong invites the court to take into account the admissions of Priest To Lun against his own interest [A167 §8 of Madam Lew and 201 §9 and the First Oral Will]. He submits that those were consistent with the Buddhist precepts and Priest To Lun’s lifelong conduct.  He submits that the court should have no difficulty in finding the intention of Priest To Lun when the Nathan Road Property was acquired in 1958.

34.  The so-called admissions and circumstances in which they were made have to be considered in context.  I shall accord such weight to them as I shall specify below.

H.  THE DOCUMENTARY EVIDENCE

35.  The acquisition of the Properties took place about 60 years ago.  The evidence necessarily involved some hearsay and circumstantial evidence on which the court may have to draw inferences.  No issue turned on admissibility.  The question was one of weight.

36.  Two classes of documents need to be highlighted:

(i)   The book called 《覺海慈航渡香江》(“Exhibit D1”) purportedly containing Priest To Lun’s biography and was published after his death; and the book called《宣化上人事蹟》 (“Exhibit D2”).

(ii)   The documents filed in a prior action in HCMP 748/2002 (“the Prior Action”) whereby D1 purported to propound “Oral Wills” of Priest To Lun.  That action was discontinued and D1 did not seek to revive it here.  The Oral Wills had some significance in relation to the views and intentions that Priest To Lun took of his Properties.

37.  In respect of class (i), Madam Lew testified that Exhibit D1 was written based on, amongst others, Exhibit D2 and another book. Priest To Lun had gone through Exhibit D2 and the other book before they were published. She edited part of Exhibit D1 to ensure its factual accuracy. 

38.  However, there were obvious errors in Exhibit D1:

(i)   There was a reference to the Happy Valley Property being bought in 1956, when the occupation permit of the building was only issued in 1957, and the opening ceremony (as advertised in the newspaper) was in 1959.  Madam Lew, understandably, could not remember the exact years since she was a teenager then.  She also explained that an opening ceremony could depend on a number of things, including choosing an auspicious day.  However, the alleged first use in 1956 was too far apart from 1959 to justify calling the ceremony an “opening” one.

(ii)   Madam Lew herself spotted an error in Exhibit D2 as to the date of purchase of the Happy Valley Property.  She circled “1950”, replacing it with “1954” but could not tell how 1954 came into being (at page 336).

39.  Mr Miu submitted that there was a possibility that certain facts stated in Exhibit D1 have been embellished, consciously or sub-consciously to enhance D1’s prospects of success in these proceedings.

40.  With respect to Mr Miu, I find that possibility to be remote.  Exhibit D1 was apparently a religious publication, based on a prior edition.  The witnesses regarded Priest To Lun as a “good monk” who followed Buddhist precepts and led a disciplined life.  He did what he taught. There was no reason why he or the editors needed to mis-state the contents of Exhibit D1 or D2 at a time when litigation was not expected.

41.  Further, in my view, a distinction should be drawn between record of events and details (such as dates/time). A person may be able to remember significant events although he may be mistaken as to the exact details.  That would not mean the event did not happen. 

42.  I accept Exhibit D1 as evidence of the truth although I read the details therein (such as dates) with caution and unless otherwise specified.

43.  In respect of class (ii), there was no challenge as to admissibility and authenticity of the Oral Wills, although it was not clear who put in the footnotes.  I accept the Oral Wills as evidence and place weight on them as evidence coming from Priest To Lun.

44.  The FirstOral Will was made by Priest To Lun on 26 July 1994, at a hospital in South California in these terms:

「有關所有財產如何處理之事：法界佛教總會（以下簡稱法總）財產，乃十方善信之布施，絕不能由任何一人專權獨斷來控制法總所有財產，不論是出家人1或在家人2都包括在內。處理法總財產所有事務，應設一委員會管理。因為我不願錯因果，所以我自己的財產全部都公開，讓大家知道。法總的財產，誰也不能動，不能一人說了算3。我私人名下，誰也沒權力動4。香港、美國、臺灣、馬來西亞各地的財產都有紀錄。財產可以公佈讓大家知道。不要對外，對內宣佈就可以了。就......。免得有漏洞，我一舉一動，一言一行，都沒有絲毫自私的地方。法總的基金是法總每一個人的，財產不能落到一個人身上。我要把它安排好。我的錢不給一個人，我交給大家，交給法界佛教總會，你們大家做。我的病好了，你們也大家做。病不好，大家繼續來做，你們懂嗎？建立一個財產管理委員會，名單出家人應佔三分之二以上。委員會的名單，在家人要選有德行的，不是有錢的。」

1   比丘、比丘尼

2   居士

3   意謂不能一人攬權

4   上人早期購有物業，仍是上人名下，尚未辦理轉名手續

45.  On a true construction of the First Oral Will:

(a)   Priest To Lun made a distinction between the assets of D1 and his own.

(b)   The assets of D1 came from donations. No single person could unilaterally control or dispose of or receive those assets.  Instead, a committee should be set up to do so.

(c)   Priest To Lun’s own money would not be given to a single person but entrusted to every person (probably the listener of the First Oral Will) and D1.  This applied whether or not he would recover from his illness.

46.  The SecondOral Will was made by Priest To Lun on 6 April 1995, at his residence in South California in these terms:

「上人再問：有沒有寫下來？（下面接著是譚慕貞手記）

上人：總會的錢不能分，不要給私人。我的產業，不能由個人決定賣就賣。誰也不准要。錢要用來造廟，辦教育及常住之用，你們現在把法界總會的錢分了，將來就餓死。」

47.  On its true construction:

(a)   Priest To Lun made a distinction between the assets of D1 and his own.

(b)   The money of D1 could not be distributed or given to an individual.  He emphasized this with a warning of punishment by starvation.

(c)   Sale of Priest To Lun’s own assets could not be decided by a single person.  Nor could a single person receive it.

(d)   Money (not sure if he was referring to his own or D1’s) had to be used for building monasteries, education and living expenses for monks. 

48.  The Oral Wills, made 8.5 months apart, consistently showed a good monk following Buddhist precepts with no intention to benefit himself but his sangha(s).  There were clear statements of his intention to apply personal assets to charitable causes.  However, they were far from defining the terms of the trust or the beneficiaries.  There was also no evidence that the “trust” was carried out or that Priest To Lun had effectively divested himself of all beneficial interests in his own assets.

I.   THE EXPERT EVIDENCE ON A BUDDHIST MONK’S ASSETS

49.  The principles for adducing expert evidence has been set out by Evans-Lombe J in Barings Plc & Anor v Coopers & Lybrand[2001] P.N.L.R. 22, at §45:

“... expert evidence is admissible ... in any case where the Court accepts that there exists a recognized expertise governed by recognized standards and rules of conduct capable of influencing the Court’s decision on any of the issues which it has to decide and the witness to be called satisfies the Court that he has a sufficient familiarity with and knowledge of the expertise in question to render his opinion potentially of value in resolving any of those issues. Evidence meeting this test can still be excluded by the Court if the Courts takes the view that calling it will not be helpful to the Court in resolving any issue in the case justly. Such evidence will not be helpful where the issue to be decided is one of law or is otherwise one on which the Court is able to come to a fully informed decision without hearing such evidence. (underline added)

50.  Paragraph 21 of the Amended Defence was related to implied charity trust and pleaded that “in 1950s, it was a common practice for disciples to donate property directly to their Buddhist master for the purpose of the furtherance of Buddhism.  The Buddhist master to whom the donation was made was a trustee of a charity trust with the purpose of advancing Buddhism.”.

51.  I see no justification for D1 to adduce expert evidence at all.  Factual evidence (say, from monks and Buddhist masters) could have been led to show the alleged practice.

52.  If I am wrong on admissibility, I have considered the expert evidence in the form of a written opinion (“the Opinion”) of the Venerable Sik Hin Hung (釋衍空), whose expertise was not challenged. 

53.  Among the 3 sources of materials consulted, the Venerable Sik Hin Hung very fairly accepted that the first 2 (ie regulations promulgated by the Chinese Buddhist Association and “Relevant Materials from the Religious Affairs Department of the State Council of the PRC”) governed Mainland China but not Hong Kong.

54.  He stated in §4(v) of the Opinion that in the recent 20 odd years, the Mainland courts basically respected Buddhist precepts and ordered that Buddhist teachers’ estate to be given to monasteries.  This statement was made without empirical evidence or reference to Mainland judgments. 

55.  I do not find those parts of the Opinion concerning the 2 preceding paragraphs to be relevant.

56.  The third source of material consulted was a publication by a Buddhist monk: 釋真明法師所著《略述戒律中對亡五眾物的處理》.  The Venerable Sik Hin Hung also gave oral evidence.  He was fair and credible and I accept his evidence.  In addition, Reverend Heng Sure also gave evidence as to some Buddhist precepts.  The sum total of their evidence, in relation to an ordained monk, was that:

(a)   What differentiates a monk from a layman is that the former becomes a member of a sangha (僧團) and takes up the precepts or vows of a monk laid down by the Buddha over 2500 years ago. This applies wherever a person becomes a monk.

(b)   Donation of personal assets to a sangha or monastery before a person becomes a monk is an option and not obligation.  A good monk would follow the Buddhist practice to make such donation or regard himself as holding his assets on behalf of the sangha.

(c)   Whether a monk donates to the sangha is not strictly enforced.  If he does not donate, he would not lose his ordained status and there is no “penalty” for not donating.

(d)   A monk can keep or dispose of personal or “secular” assets.  For example, the Venerable Sik Hin Hung’s keeps assets inherited from his father before he became a monk, which he intends to dispose of by will to non-monastic people (his family members).  He also receives salary from his university teaching job.  He keeps a bank account.  Until he gives them away, the assets remain in his possession.

(e)   If a monk acquires property when he was a monk, the property legally belongs to him under the law of the land, but he would have bought the property for the sangha, not his family.

(f)   Disposal of a monk’s personal property after death is governed by the law of the land.  It was clear that the Venerable Sik Hin Hung knew the difference between secular law and Buddhist precepts that he took the care to prepare a will.

(g)   Looking after parents (eg giving them food or assets) is not inconsistent with Buddhist tradition in upholding filial duties.

57.  In view of such evidence, it was clear that there was not even a religious obligation on a monk to donate his personal assets, still less a legal obligation for him to be divested of all his personal assets automatically upon death.  Any donation by a disciple was not to his Buddhist master.  Disposal of a monk’s assets after death is governed by the law of the land.  The expert evidence does not support the pleaded practice.

58.  Further, in §5 of the Opinion, the Venerable Sik Hin Hung stated that Priest To Lun’s assets were religious assets belonging to “the Sangha [ie the people] or monastery [ie the place]” (都屬於宗教性財產收入，應當是其所屬僧團或寺廟共有的集體財產).  He explained that as a monk moved, his personal property should move with him to the new sangha.

59.  Priest To Lun had preached at different monasteries (ie Tsz Hing Monastery, Buddhist Lecture Hall and 23 monasteries in the Cities of Ten Thousand Buddhas in the USA).  The Venerable Sik Hin Hung testified that it was up to the monasteries to sort out between themselves to whom his assets belonged. 

60.  Given such evidence, there was no certainty as to who the beneficiary should be when a monk has served more than one monastery.

61.  Moreover, in the present case, the Buddhist Lecture Hall was not a legal entity.  D1 is a legal person but Priest To Lun was not its founder.  Which was Priest To Lun’s sangha?  There was no certainty in the eyes of the law.

62.  Furthermore, as revealed from Exhibit D1, Priest To Lun appeared to have wealth at his disposal during his lifetime which had not been donated:

(i)   At page 491: it was said that the Happy Valley Property was purchased at a price of $45,000.  Madam She Guo Man provided $40,000.  Priest To Lun topped up the difference (我和其他人補足餘款).  Madam Lew’s evidence that the funds had come from donations could only be her own belief.  If Priest To Lun had treated all monies as donation not belonging to himself, there was no need to distinguish between himself and others at page 491.

(ii)   Madam Lew knew that there was a property adjoining the Happy Valley Property but it was not used in the past for the Buddhist Lecture Hall.  However, she knew that the adjoining property is now used as a Buddhist Lecture Hall but she did not know how it was acquired notwithstanding that she is a director of D1.

(iii)   At page 491, Priest To Lun purported to have stated that “等我臨來美國的時候沒有錢,我想賣了一層樓好來美國建立道場”.  Apparently, Priest To Lun still retained another property (apart from the Happy Valley Property) and some power over its disposal.

63.  In my view, the expert evidence could not establish the pleaded practice or that Priest To Lun was a trustee of his own assets.

J.   THE EXPERT EVIDENCE ON VALUATION

64.  The single joint expert’s report (“the Surveyor’s Report”) was not disputed, and I place full weight on it.

K.  AN OVERVIEW OF 60 YEARS SINCE 1954

65.  Since Priest To Lun came to Hong Kong, there was no evidence as to his having any source of income as a monk.  Madam Lew’s evidence was that he had had no income bearing job.  Until his death in 1995, Priest To Lun had devoted his whole life as a monk to preaching Buddhism. 

66.  All of the 4 properties were registered in Priest To Lun’s name as a Buddhist monk.  For 40 years up to 1995 (and thereafter), their respective uses have not substantially changed.  He had not personally used the 4 Properties except to preach on 4 occasions in 1974, 1978, 1981 and 1988.

67.  Priest To Lun led a frugal life, never spending money for his own good.  He taught that “the very best thing for cultivators of the Way is to uphold the precept against touching money”.  There was a Shakya Fund set up by D1 to enable monks and nuns who would not touch money to apply for money, with justification.  Priest To Lun subjected himself to the same procedures under the Shakya Fund, just like his disciples, even to assist fellow villagers in need.  He practiced what he taught.

68.  Priest To Lun had provided money to relieve his parents and their village from poverty and flooding.  Such financial assistance differed amongst persons.  The financial assistance to Priest To Lun’s brother was to repay the latter for taking care of their parents, as admitted by Madam Bai.  Priest To Lun also sponsored the trip of his brother and his family to the USA.  No witness could tell the source of such sponsorship.  All of these did not detract from Buddhist precepts.

69.  I accept the evidence of Reverend Heng Sure and Madam Fu that people donated because they were impressed by Priest To Lun.  The donations were made to Priest To Lun.  Donors would not ask him to account for the money or ask for receipts from him.  They simply trusted him to use it for advancement of Buddhism.  There was no evidence that he abused that trust.  The Oral Wills pointed in the same direction.

70.  When Priest To Lun died, he left no personal assets, whether in Hong Kong or the USA, except the subject properties.  See the Schedule of Properties attached to the grant of letters of administration to his estate and the evidence of Madam Lew and Reverend Heng Sure.

71.  I now analyse each of the properties.

L.   THE HAPPY VALLEY PROPERTY

72.  The Plaintiffs no longer contest D1’s case regarding the Happy Valley Property.  This concession by the Plaintiffs was important. This Property was held in the name of Priest To Lun without a declaration of trust or any restriction on user. It was inside a residential building with a main gate at the entrance to the building although it had no gate itself and was open to the public. It was purchased in cash, said to be from donations of the Tam family (of which Madam Lew was a member).  Despite the lack of evidence that all donors wanted to donate for a charitable purpose as opposed to donating to Priest To Lun personally, the Plaintiffs conceded that this Property was subject to a public charity for the advancement of Buddhism.

M.  THE LANTAU PROPERTIES

M1. Source of the Lantau Properties

73.  The Deed of Gift was the source of the Lantau Properties.  The relevant clauses are:

“... the Grantor [Tung] has been approached by the Donee [Priest To Lun] with the project of developing the [Lantau Properties] into a monastery for the advancement of Buddhist religion which the Grantor has agreed to do so...

...

1. That the Donee shall have no right to dispose of (whether by way of sale or mortgage or otherwise) the said premises hereby first [ie Lot 5A] and secondly assigned [ie Lot 25] during the respective lives of the Grantor and Lo Wan Ting, Chan Mo Ching and Ng Pui Shan (hereinafter referred to as “the Beneficiaries”).

2. That the Donee shall at his own costs develop the said hereby first and secondly assigned premises by the erection of additional buildings thereon and the planting of trees or otherwise. (“Clause 2”)

3. That during the said lifetimes of the Beneficiaries the Beneficiaries shall have free access and liberty to go pass through up and down over and along the said hereby first and secondly assigned premises and any buildings erected thereon without any interruption by the Donee or by any person or persons claiming through under or in trust for the Donee.

4. That during the lifetimes of the Beneficiaries they shall have the absolute use enjoyment of one room on the first floor of the building at present erected on the said premises such said room to be of their own choice.

5. That during the said lifetimes of the Beneficiaries the Donee shall provide food and lodging to the Beneficiaries whenever the Beneficiaries shall choose to reside at the said hereby first and secondly assigned premises.

6 That during the respective lifetimes of the Beneficiaries the Donee shall only use the said hereby first and secondly assigned premises and/or any building erected thereon for the sole purpose of advancing the Buddhist religion and not otherwise.

7. That on the death of the last survivor of the Beneficiaries the said [Lantau Properties] shall become vested in the Donee absolutely free of the hereinbefore recited trusts and conditions and of all other conditions and trusts whatsoever...” (“Clause 7”)

74.  On a proper interpretation, these clauses showed that Priest To Lun was the initiator who asked for the gift.  The gift was made to him in the capacity of a monk using his name To Lun.  The common intention of both the donor and the done was that it was not an outright gift but that there was an express trust to carry out a charitable purpose subject to the life interests of the Beneficiaries.  After the death of all the Beneficiaries, Priest To Lun would be free to use the land in any way he liked.

75.  Mr Miu does not dispute this interpretation in his closing submission.  He concedes that until the last of the survivor of the Beneficiaries died, Priest To Lun was bound contractually to use the premises for the advancement of Buddhism, and hence the Tsz Hing Monastery was a charity in that period.  If after the Lantau Properties had vested in Priest To Lun absolutely, he had continued to use the premises as a charity, then and only then may it be argued that the public trust was created (or, if I may add, continued).

76.  I agree to his submission as a matter of law subject to evidence of any contrary intention. 

M2.   Resources for building the Tsz Hing Monastery

77.  The resources for construction of the Tsz Hing Monastery came from 3 sources: (i) the Lantau Properties; (ii) another piece of land; and (iii) money.

78.  In respect of source item (i), Lot 25 and Lot 5A are not adjoining properties.  There is a 10-minute walk between them.  At the time of the Deed of Gift, Lot 5A had a 2-storey villa on it but it was in a dilapidated state. 

79.  In respect of source item (ii), a monastery (國清禪院) used to stand on the land adjacent to Lot 25, ie the Remaining Portion of Mang Cheung Po Lot No. 5, Man Cheung Po, Lantau Island (“Lot 5RP”), which was not subject to the Deed of Gift.  That monastery was destroyed during the Japanese invasion of Hong Kong. 

80.  Priest To Lun obtained the consent of relevant persons of the monastery and took over the dilapidated Lot 5RP.  He kept the villa and built the Tsz Hing Monastery, which stood partly on Lot 5A and partly on Lot 5RP.  (See Exhibit D1 at pp 306-8; surveyor’s report, p 358.)  In fact the size of Lot 5RP occupied by the Tsz Hing Monastery (see the dotted rectangle on B358) was similar to, if not larger than, that of Lot 5A.

81.  The East Wing (for male) of the Tsz Hing Monastery stood on 5RP whereas the West Wing (for female) stood on Lot 5A (Exhibit D1, p 308). They were to share common facilities like the main Buddhist hall, guest hall, 齋堂，關房 and 茅蓬.  (These will be termed “the Layout”).

82.  In respect of source item (iii), there was no evidence of the source of the money.  Mr Chong’s submission that there were donations from followers of Priest To Lun was premised on the hearsay evidence of Madam Fu who appeared years after the Tsz Hing Monastery was completed and carried no weight. 

83.  However, I do not think the source of the money was relevant.  Tung and Priest To Lun contemplated in Clause 2 that the latter had to raise his own funds for building.  The money for building would have formed part of the express trust.

M3. Use of the Tsz Hing Monastery

84.  The Tsz Hing Monastery has been put to use since about 1956.  Lot 25 (with an area over 200,000 square feet) was much bigger in size than Lot 5A.  It has a concrete arch depicting the name of the Tsz Hing Monastery, a footbridge and footpath connecting the Tsz Hing Monastery.  Lot 25 was clearly incidental to the use of the Tsz Hing Monastery.

85.  Mr Miu concedes that the Tsz Hing Monastery was a charity and had, at least up to 1972 (as borne out by the yearly newspaper cuttings) been open to the general public for the advancement of Buddhism.

86.  In recent years the Tsz Hing Monastery has less visitors than before, probably because there is a more convenient alternative in Happy Valley.  However, that could not undermine the fact that it is a place for public worship and advancement of Buddhism.

87.  The type of gatherings at the Tsz Hing Monastery has changed from time to time but they were all for the purpose of advancement of Buddhism.  This was borne out by the evidence of Madam Fu, a first-hand witness who has been regularly attending the Tsz Hing Monastery before the death of Priest To Lun and till now.  I accept her evidence.

88.  According to Madam Fu, there were/are 2 big annual events, lasting a total of 4 weeks, which could be attended by Buddhist masters, monks, followers and those not yet converted to Buddhism. There are summer youth courses which were not restricted to members of the Buddhist Lecture Hall.  There are small-scale events lasting 1-2 days.

89.  Madam Fu testified as to the Buddhist Lecture Hall keeping a mailing list of converted followers, their friends and relatives.  There appears to be no special criteria to be able to get onto the mailing list, except that approval of a Buddhist master has to be obtained. Those on the mailing list would be regarded as “members”.  Notices would be posted up on the notice board or mailed to those on the mailing list.

90.  According to Madam Fu, the Tsz Hing Monastery is also used as a retreat house.  The Buddhist masters will go there for meditation.  There is a resident nun.  The Buddhist master, 居士 and monks from the Buddhist Lecture Hall also go there once a month.  There have also been visitors from other monasteries round the world. The Buddhist master will decide who to let in.  From what Madam Fu knew, no one has been rejected by the Buddhist master. 

91.  The court is entitled to assume that some benefit accrues to the public from the attendance at places of worship of persons who live in the world and mix with their fellow citizens: Neville Estates Ltd v Madden& ors (1962) 1 Ch 832, at pp 852 & 853, Cross J.

92.  Applying Neville Estates, it was clear that the attendees at the Tsz Hing Monastery did not just go for seclusion for their own salvation.  At least the Buddhist masters would continue preaching Buddhism (at the Buddhist Lecture Hall for example) after the retreats and mix with followers and non-followers.  The use of the Tsz Hing Monastery for retreat purpose was to open out to reach the public: Cheung Man Yu,at §§72-73; Li Kim Sang Victor, §§78 & 79.

93.  The use of the Tsz Hing Monastery as residence for a nun may be regarded as incidental to the advancement of Buddhism.  Even if it was not, it was at worst breach of the charitable trust (if one existed) but would not undermine the Tsz Hing Monastery as an established place of worship and advancement of Buddhism.

M4.  Whether the Tsz Hing Monastery was or is open to the public

94.  It was clear from Section M3 above that the Tsz Hing Monastery was and is open to the public.

95.  The Plaintiffs rely on an article from a website which described the Tsz Hing Monastery as “not really open to the public”.  The website was not that of D1 or the Tsz Hing Monastery.  The writer of this article and the source of information were not identified.  In any case, it was against the weight of the evidence.  I place no reliance on this article.

96.  Mr Miu also refers to a remark in the Surveyor's Report that the Lantau Properties were “private” properties.  I am unable to place weight on this remark.  Apparently the surveyor was distinguishing private property from eg government land, not personal use and public charitable use.

M5. Whether the Lantau Properties was and is subject to a public charity

97.  The date of death of the last survivor of the Beneficiaries was important to ascertain when the beneficial interest in Priest To Lun became absolute, and whether Priest To Lun had continued the land use.

98.  The burden of proof is on D1.  This is because Priest To Lun or (after his death) the Plaintiffs have the right to possession of the Lantau Properties against the whole world, even subject to the life interests of the Beneficiaries.  If D1 asserts a better right to possession, it has to prove it.

99.  Unfortunately, there was no evidence as to whether any of the Beneficiaries are still alive or what the date of death of the last survivor of them was. 

100.  Mr Chong submits that Tung and 董果耆居士 also known as董仲偉爵士 mentioned in page 335 of Exhibit D1 were one and the same person, who died in February 1968.  Mr Miu was prepared to accept that proposition. Still, there was no evidence that Tung was the last survivor of the Beneficiaries. 

101.  I note, however, that the Beneficiaries did not appear to be in occupation.  The amended writs had been posted on the Lantau Properties but the Beneficiaries had not come forward to assert their life interests.  On balance of probabilities, they had probably passed away although whether it occurred before or after 1995 was still unknown.

102.  D1’s case would fail unless it can show that there was a contrary intention regardless of Clause 7.

103.  I find there was evidence of such intention when considering the following factors collectively:

(a)   For 40 years up to 1995, the Tsz Hing Monastery had stood on 2 lots of land from different sources, of which Lot 5RP was not bound by the Deed of Gift. 

(b)   In view of the Layout, it was inconceivable that Priest To Lun would have intended that the Tsz Hing Monastery should be severed so that the part that stood on Lot 5A would be reverted to him when all the Beneficiaries have died, whereas the other part would remain subject to a charity. 

(c)   Priest To Lun’s stated intention in the Deed of Gift to advance Buddhism was not limited in time.

(d)   He devoted his lifetime to preaching Buddhism.

(e)   Reverend Heng Sure’s evidence was that Priest To Lun had always taught that the monasteries and Buddhist Lecture Hall did not belong to him or any individual.  For 40 years, Priest To Lun acted what he taught in not asserting personal right over the Tsz Hing Monastery.

104.  The Tsz Hing Monastery satisfies the 3 criteria in Cheung Man Yu, §24, as being built for a charitable purpose, ie for advancement of Buddhism.  It was open to the public and was for the benefit of the public.  It was exclusively charitable, past and present, including its incidental use by a resident nun.  Applying Cheung Man Yu, §45.  Priest To Lun had created a charity even though there was no declaration of trust for the period beyond the express trust.  It was not a case of a landlord lending out his property temporarily for a charitable purpose.  I find that the Lantau Properties was and is bound by that charity even beyond the period of the express trust and regardless of Clause 7.

N.  THE NATHAN ROAD PROPERTY

105.  D1’s case is that the Nathan Road Property was acquired with donations.  The original intention of Priest To Lun was to use it as a lecture hall.  Because of the noisy and complicated environment, that intention was never fulfilled. The Nathan Road Property has all along been leased out for rent to support the charitable work of D1. 

106.  The Nathan Road Property was purchased in the name of Priest To Lun, ie in his office as a monk.  According to the land search record, it was purchased with cash without the need for a mortgage. Madam Lew and Madam Fu had been told by Priest To Lun that the purchase price came from donations, and Reverend Heng Sure had been told by Priest To Lun that all the properties in his name came from donations. There was no evidence that Priest To Lun had other sources of income.

107.  Madam Fu testified that donors like her would make donations to Priest To Lun without specifying how he should use them.  They merely trusted Priest To Lun to be fair and not selfish and do good deeds.  Such evidence was irrelevant as the Nathan Road Property was purchased before she came into the picture.

108.  According to the sale and purchase agreement relating to the Nathan Road Property, there were 4 other properties in the same building purchased at the same time.  Madam Fu could not tell whether those 4 were adjacent to the Nathan Road Property and how they were disposed of.  There was simply no evidence as to why Priest To Lun saw fit to keep only the Nathan Road Property but disposed of the other 4.

109.  I have alluded to the possibility of Priest To Lun having personal assets at his disposal in paragraph 62 above.  Even if what the defence witnesses said as to original intention and source of purchase money was entirely accepted, a fundamental change of purpose upon completion of the Nathan Road Property would fail to satisfy the 1^st criterion of Cheung Man Yu.

110.  The Nathan Road Property was never used for advancement of Buddhism.  The 3^rd criterion of Cheung Man Yu that the institution must be exclusively charitable was not satisfied.

111.  According to Madam Lew, a Mr John Man has been handling the Nathan Road Property pursuant to a power of attorney from Priest To Lun.  He received the rental by auto-deposits and applied them to defray expenses (such as taxes and maintenance) and occasionally to donate to charities and needy students.  Mr Man had to ask for D1’s approval to disburse large sums of money, but it never occurred.

112.  The power of attorney, bank records of Mr John Man or accounts books of D1 (who has allegedly been “managing” the Nathan Road Property) which could have shed light on the use of the rental were not produced. The 2^nd criterion of Cheung Man Yu that the institution existed for the benefit of the public was not satisfied. 

113.  I am not satisfied that the Nathan Road Property was subject to a charitable trust.

O.  FINDINGS

114.  I rely on the facts as set out in Sections C and K above.

115.  Assuming expert evidence was admissible, I find that there was no religious obligation on a monk to donate his personal assets, still less a legal obligation for him to be divested of all his personal assets automatically upon death.  Disposal of a monk’s assets after death is governed by the law of the land.

116.  The Oral Wills were clear statements of intention to apply personal assets to charitable causes.  However, they were far from defining the terms of the trust or the beneficiaries.  There was also no evidence that the “trust” was carried out or that Priest To Lun had effectively divested himself of all beneficial interests in his own assets.

117.  By concession, the Happy Valley Property is subject to a charity and does not fall into the estate.

118.  The resources for building the Tsz Hing Monastery had come from 3 sources. Two of them, ie the Lantau Properties and money were subject to the express trust.  The 3^rd source, ie Lot RP5 was not.

119.  The Tsz Hing Monastery has since its construction always been open to the public for worship and for advancement of Buddhism.  It was a public charity up to 1972, by concession.

120.  The Beneficiaries did not appear to be in occupation of the Lantau Properties and have not come forth to assert their life interests.  They have probably died, but there was no proof as to the date of the death of the last survivor.

121.  For reasons given in para 103 above, the charity established before 1995 was intended to continue beyond the period of the express trust, regardless of Clause 7.

122.  The Tsz Hing Monastery satisfies the 3 criteria of Cheung Man Yu despite the lack of a formal declaration of trust.

123.  The Nathan Road Property fails to satisfy all the 3 criteria of Cheung Man Yu.  It was not subject to a charity.

124.  Section 12 of the Intestates’ Estates Ordinance, Cap 73 (“IEO”) provides that the IEO shall have effect as regards any person dying intestate after the commencement of the Ordinance (in 1972).  Hence, unless there is some other statute enacting a different law of inheritance applicable to Buddhist monks like Priest To Lun, IEO should apply: Re Jacob Vettichirayil (1989) 2 MLJ 418 .

125.  Though the Buddhist precepts have been followed by Priest To Lun, they do not form part of the law.  IEO applied to his assets.  Accordingly, being subject to a charity, the Lantau Properties do not fall into the estate but the Nathan Road Property does.

P.   MESNE PROFITS AND POSSESSION

126.  No notice to quit has been served by the Plaintiffs and there was also no plea that the defendants have been in wrongful occupation before issue of the writ.  Counsel have (rightly, in my view) agreed to use the date after the writ (7 June 2007) for computation of the mesne profits. 

127.  The period for which mesne profits would thus be from 7 June 2007 to 6 June 2015.  For the one year from 7 June 2015 to 6 June 2016, the parties propose to apply the same rate as the previous two-year period (ie with no adjustment of rent).  The figures for each property are summarized in the Table attached to this judgment.  The total market rents which should be paid for the Nathan Road Property are $1,255,200 + $170,400 per annum from 7 June 2016.

128.  Counsel have suggested that in respect of the Nathan Road Property, D1 shall move out within 3 months. 

Q.  JUDGMENT

129.  I order as follows:

(1)   That in respect of the Happy Valley Property:

(a)   The court declares that it is subject to a public charity for the advancement of Buddhism and does not form part of the estate of Priest To Lun;

(b)   The court declares that Priest To Lun held the legal title of the Happy Valley Property for and on behalf of that public charity;

(c)   The claim in HCA 1191/2007 is dismissed;

(d)   The counterclaim for a declaration that Priest To Lun held the Happy Valley Property on trust for D1 is dismissed.

(2)   That in respect of the Lantau Properties:

(a)   The court declares that they are subject to a public charity for worship and the advancement of Buddhism and does not form part of the estate of Priest To Lun;

(b)   The court declares that Priest To Lun held the legal title of the Lantau Properties for and on behalf of that public charity;

(c)   The claims in HCA 1192 and 1193/2007 are dismissed;

(d)   The counterclaim for a declaration that Priest To Lun held the Lantau Properties on trust for D1 is dismissed.

(3)   That in respect of the Nathan Road Property:

(a)   The court declares that it forms part of the estate;

(b)   There be judgment in favour of the Plaintiffs against D1 for an order for possession of the Nathan Road Property;

(c)   That D1 shall deliver vacant possession to the Plaintiffs within 3 months from the date of this judgment;

(d)   That D1 do pay damages to the Plaintiffs in the sum of $1,255,200 and at a rate of $170,400 per annum from 7 June 2016 until D1 delivers up vacant possession to the Plaintiffs;

(e)   The counterclaim for a declaration that Priest To Lun held the Nathan Road Property on trust for D1 is dismissed.

R.   COSTS

130.  The Plaintiffs have conceded on the Happy Valley Property just a few days before trial, lost on the Lantau Properties and won on the relatively simple Nathan Road Property.  Most of the costs have been spent on the first 2 properties.  The Plaintiffs should bear most part of D1’s costs.

131.  The expert evidence was not admissible and in any event did not support the pleaded but abandoned defence.  D1 should bear the costs of and incidental to adducing expert evidence.

132.  I would order overall costs to follow the event and that the Plaintiffs should bear 60% of D1’s costs on party-and-party basis.

133.  Mr Miu, however, asks for costs.  This was because the Plaintiffs made an open offer by letter dated 21 May 2016, conceding that the Happy Valley Property and Lantau Properties have been held under a public charitable trust and that they should be conveyed to D1, whilst D1 should give up its claim to the Nathan Road Property.  Mr Miu submits that the Plaintiffs decided not to contest the case on the Happy Valley Property because of the late production of relevant documents, only by 29 March 2016 (Exhibit D1 and newspaper cuttings).  Had D1 accepted it, the parties might have spent just a day’s hearing for the court’s approval.  Mr Miu further submits that the Plaintiffs withdrew that offer on 27 May 2016 in respect of the Lantau Properties, only after D1 has “rejected” that offer. 

134.  I reject such submissions for the following reasons:

(a)   D1 had by letter dated as early as 13 April 2012 that its case on the Happy Valley Property and Lantau Properties rested on public charitable trust.  At all times, the Plaintiffs could have visited the 2 Properties to verify their uses and asked for discovery to decide whether to concede D1’s case.

(b)   D1 did not reject the open offer but asked for the bases for the Plaintiffs’ concession.  It was, in my view, a pedantic and unnecessary approach.  This court took less than 5 minutes on the first day of trial to ascertain the Plaintiffs’ unequivocal stance in relation to the Happy Valley Property and the terms of the court order to be made.  D1’s approach, however, would not undermine its entitlement to costs.

135.  D1 is involved in this action as a “trustee” to protect properties that might belong to a public charity.  It should be entitled to its costs on trustee basis out of the charity’s assets. 

136.  The SJ’s costs should also be borne out of the charity’s assets, on indemnity basis.

137.  I adjourn the matter on the question of “better administration” of the trust property.  D1 and the SJ shall submit a set of proposed directions within 28 days.  I shall decide whether and when an oral hearing is required after having sight of the proposed directions.

138.  My order, nisi, on costs is summarized as follows:

(a)   60% of the costs of D1 shall be borne by the Plaintiffs on party-and-party basis;

(b)   The Plaintiffs’ own costs shall be taxed in accordance with the Legal Aid Regulations.

(c)   D1’s own costs shall be borne out of the charity’s assets on trustee basis.

(d)   SJ’s own costs shall be borne out of the charity’s assets on indemnity basis.

139.  I thank counsel for their assistance.