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THE SECRETARY FOR JUSTICE v. JOSEPH LO KIN CHING AND OTHERS

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THE SECRETARY FOR JUSTICE v. JOSEPH LO KIN CHING AND OTHERS

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CACV 44/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 44 OF 2013

(ON APPEAL FROM HCMP NO. 853 OF 2012)

________________________

IN THE MATTER OF the Will dated 28 July 2002 of KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H WANG, late of Top Floor, Chinachem Golden Plaza, 77 Mody Road, Tsimshatsui East, Kowloon, Hong Kong, Widow, Deceased

________________________

BETWEEN

	THE SECRETARY FOR JUSTICE	Plaintiff
	and
	(1) JOSEPH LO KIN CHING and DEREK LAI KAR YAN, THE JOINT AND SEVERAL ADMINISTRATORS OF THE ESTATE OF KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H Wang	Defendants
	(2) CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司)
	(3) 施福英，THE NATURAL MOTHER OF THE DECEASED
	AND

BETWEEN


	THE SECRETARY FOR JUSTICE	Plaintiff
	and
	(1) JOSEPH LO KIN CHING, DEREK LAI KAR YAN, LAM HOK CHUNG RAINER and JONG YAT KIT, THE JOINT AND SEVERAL ADMINISTRATORS OF THE ESTATE OF KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H Wang	Defendants
	(2) CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司)
	(3) 施福英，THE NATURAL MOTHER OF THE DECEASED
	(By original originating summons and order to carry on)
	AND

BETWEEN

	THE SECRETARY FOR JUSTICE	Plaintiff
	and
	(1) LAM HOK CHUNG RAINER, JONG YAT KIT and YU SAI HUNG, THE JOINT AND SEVERAL ADMINISTRATORS OF THE ESTATE OF KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H Wang	Defendants
	(2) CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司)
	(3) 施福英，THE NATURAL MOTHER OF THE DECEASED
	(By original originating summons and order to carry on)

________________________

Before : Hon Lam VP, Cheung and Kwan JJA in Court

Dates of Written Submissions : 23 June 2014, 4 and 17 July 2014

Date of Judgment : 15 September 2014

_____________

JUDGMENT

_____________

Hon Lam VP (giving the Judgment of the Court):

1. This is an application for leave to appeal to the Court of Final Appeal against our judgment of 11 April 2014. The Foundation seeks leave under the “as of right” limb as well as the discretionary limb in Section 22 of the Hong Kong Court of Final Appeal Ordinance. The Secretary opposed leave on both limbs.

2. Parties agreed to the disposal of the application on paper. Written submissions were filed in accordance with the directions given by this court on 26 May 2014.

3. Having read and considered the written submissions, we are of the view that the intended appeal falls within the “as of right” limb of Section 22 and we grant leave accordingly.

4. The “as of right” limb which is relevant for present purposes provides that leave to appeal is as of right “from any final judgment of the Court of Appeal in any civil cause or matter … where the appeal involves, directly or indirectly, some claim or question to or respecting property or some civil right amounting to or of the value of $1,000,000 or more”. We shall refer to this as the “property claim as of right limb”.

5. In the context of civil cause or matter relating to an estate, this limb has been considered in several probate appeals. In Chinachem Charitable Foundation Ltd v Chan Chun Chuen (2011) 14 HKCFAR 798, Ribeiro PJ explained the proper approach to the “as of right” limb at para 20 of the judgment and went on to discuss it in the context of a claim in respect of an estate at paras 26 to 31. For present purposes, the following propositions derived from His Lordship’s judgment are relevant:

(a) To come within the “property claim as of right limb”, the claim must be a claim to some particular property or to a proprietary right of the requisite value. Other types of claim are insufficient, even if they are incidental to the enjoyment of property rights, see para 20(iv);
(b) The court focuses on the value of the claim instead of the value of the property or proprietary value in considering the threshold amount, see para 20(v);
(c) The order which the Court of Final Appeal would make at the end of the appeal (if the appeal is successful) must have the immediate effect of conferring or imposing on the relevant parties a financial benefit or detriment in the quantified amount. It is not enough to show that such a financial impact is a likely eventual result, see para 20(vii);
(d) In the context of probate appeals, the grant of leave as of right in Wang Din Shin v Nina Kung CACV 460 of 2002 and Re Estate of Mui Yim Fong (No 2) [2010] 5 HKLRD 112 was correct in law. In those cases, the Court of Appeal had regard to the reality of the situations: winning the appeal would result in the appellants becoming entitled, without any further adjudication, assessment or apportionment, to the entirety of each estate, see paras 26 to 30; and
(e) The immediacy requirement means that the order sought in the appeal, if granted, would have the effect of conferring the quantified financial benefit without need for any further adjudicatory process to determine any question of fact or law, including any process of assessment, quantification or apportionment, para 31.

6. In the present appeal, there is no dispute that the estate in question has a value well exceeds $1,000,000. The Will having been proved in the probate action, there is no dispute that the Foundation is entitled to the property comprised in the estate. The issue of construction which is engaged in the appeal was identified at para 7 of our judgment of 11 April 2014, viz whether the Foundation received the estate as an absolute gift as opposed to a trustee holding the same on a charitable trust. We decided the appeal against the Foundation. The Foundation intends to challenge our judgment and seeks to persuade the Court of Final Appeal that it should get the estate as an absolute gift.

7. If the Foundation were successful in the intended appeal, subject to what we shall say in respect of Clause 4 of the Will below, it would become the absolute owner of the estate. Because of its charitable status and its memorandum and articles of association, it is obliged to make use of the property for charitable purposes. And in its daily operation and administration, it shall be subject to the supervision under the parens patriae jurisdiction of the court and the Secretary. However, none of these detract from the position that the Foundation would become the absolute owner of the estate if it were successful in its intended appeal. The claim of the Foundation in the intended appeal is that on proper construction the Will provides it to become the absolute owner of the estate.

8. We do not agree with the submissions of Mr Taube QC (together with Mr Ho SC and Mr Yin for the Secretary) that the claim of the Foundation is not a claim in respect of some particular property or to a proprietary right of the requisite value.

9. As regards the immediacy requirement, Mr Taube contends that the requirement is not satisfied because the Foundation is merely an administrative vehicle for administering property for charitable purposes for the public benefit. With respect, we do not consider such characterization of the Foundation to be an obstacle in satisfying the immediacy requirement. In effect, this contention invites us to ignore the legal and equitable ownership of the property by a charity and treat the charity as a mere administrative vehicle. For present purposes, we do not think this is a correct approach for determining whether the immediacy requirement is satisfied. As we said at para 10 of our judgment, as the law stands, we do not think the Foundation or its directors can be regarded as trustees in respect of the assets owned by the Foundation.

10. Though there may be some formalities before the Foundation become the legal owner of the estate, we have not been told of any further adjudicatory process to determine any question of fact or law, including any process of assessment, quantification or apportionment that the Foundation must undergo to get its hand on the estate if it were successful in the intended appeal. In this respect, the present case is different from Chinachem Charitable Foundation Ltd v Chan Chun Chuen, supra.

11. We alluded briefly to Clause 4 of the Will in the earlier part of this judgment. If the Foundation were successful in the intended appeal, even on its case, it would have to comply with Clause 4 (see para 76 of our judgment of 11 April 2014). We have accepted Mr Taube’s analysis that Clause 4 is to be construed as powers (see para 87 of our judgment). We do not think the obligations of the Foundation under Clause 4 prevent it from satisfying the immediacy requirement because the powers (or on the Foundation’s case, the personal obligations) are to be exercised only after the Foundation becomes the owner of the estate. Further, as held by us at para 114, such power is to be exercised in respect of income from the estate. Therefore, it is not a case where one cannot tell whether the Foundation would obtain an immediate financial benefit of more than $1,000,000 without any process of assessment.

12. We shall grant leave to appeal accordingly. Costs of the application will be costs in the cause of the appeal to the Court of Final Appeal.

13. Parties have not addressed the question as to the terms on which leave should be granted. We direct that if parties can agree on the terms, they should submit jointly a draft order for our approval within 14 days. If there were disagreement on any term, they should each submit, again within 14 days, their respective version of the draft order for our determination on paper.

(M H Lam)
Vice President

(Peter Cheung)
Justice of Appeal

(Susan Kwan)
Justice of Appeal

Mr Simon Taube, QC, Mr Ambrose Ho, SC, and Mr Michael Yin, instructed by Department of Justice, for the Plaintiff/Respondent

Mr Patrick Fung, SC and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the 2^nd Defendant/Applicant

CACV 44/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 44 OF 2013

(ON APPEAL FROM FCMP NO. 853 OF 2012)

________________________

BETWEEN

	THE SECRETARY FOR JUSTICE	Plaintiff
	and
	(1) JOSEPH LO KIN CHING and DEREK LAI KAR YAN, THE JOINT AND SEVERAL ADMINISTRATORS OF THE ESTATE OF KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H Wang	Defendants
	(2) CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司)
	(3) 施福英，THE NATURAL MOTHER OF THE DECEASED
	AND

BETWEEN

	THE SECRETARY FOR JUSTICE	Plaintiff
	and
	(1) JOSEPH LO KIN CHING, DEREK LAI KAR YAN, LAM HOK CHUNG RAINER and JONG YAT KIT, THE JOINT AND SEVERAL ADMINISTRATORS OF THE ESTATE OF KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H Wang	Defendants
	(2) CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司)
	(3) 施福英，THE NATURAL MOTHER OF THE DECEASED
	(By original originating summons and order to carry on)
	AND

BETWEEN

	THE SECRETARY FOR JUSTICE	Plaintiff
	and
	(1) LAM HOK CHUNG RAINER, JONG YAT KIT and YU SAI HUNG, THE JOINT AND SEVERAL ADMINISTRATORS OF THE ESTATE OF KUNG, NINA (龔如心) also known as NINA KUNG and NINA T H Wang	Defendants
	(2) CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司)
	(3) 施福英，THE NATURAL MOTHER OF THE DECEASED
	(By original originating summons and order to carry on)

________________________

Before : Hon Lam VP, Cheung and Kwan JJA in Court

Date of Last Written Submission : 4 June 2014

Date of Decision on Costs : 18 July 2014

_____________________

DECISION ON COSTS

_____________________

Hon Lam VP (giving the Decision on Costs of the Court):

1. On 11 April 2014, we handed down our judgment dismissing the appeal by the Foundation. Since then, we have received written submissions on costs from all parties. We now give our decision on costs of the appeal.

2. As far as the costs of the 1^st Defendants are concerned, it is not controversial that they should have their costs in this appeal to be paid on a trustee basis. The Secretary for Justice [“the Secretary”] submitted that the Foundation should bear the costs of the 1^st Defendant instead of having it paid out of the estate.

3. The real controversy is whether the Foundation should have its own costs out of the estate and whether it should pay the costs of this appeal. The Foundation asked for its own costs from the estate whilst the Secretary asked for its costs (and, as mentioned above, the costs of the 1^st Defendant) to be paid by the Foundation.

4. The Foundation submitted that this is a case falling within Buckton^{^[1]}category 2, raising points on construction of the Will or some other question of law arising in the administration of the estate, as such costs of the litigation should be borne by the estate. The underlying premise is that the litigation is for the benefit of the estate. The Foundation also prayed in aid the principle that the estate should pay for litigation brought about by the deceased in having homemade will with uncertain features and concepts introduced into it, citing Cheung Pui Yuen v Worldcup Investments Inc (2009) 12 HKCFAR 31 at para 58; Re Hall-Dare [1916] 1 Ch 272 at p.277-8; Nina Kung v Wang Din Shin (No 2) (2006) 9 HKCFAR 800 para 22.

5. Even though this is an appeal, the Foundation submitted it is appropriate for it to test the judgment below by an appeal in view of the size of the estate, the issues in question and the intended operation of the provisions in the Will until eternity. Mr Hinks QC relied on Law Shuk Hoi v Lo Lok Fung Kenneth [2011] 5 HKLRD 23 and Re Stuart [1940] 4 All ER 80 in advancing his contention that in such circumstances, the costs of the appeal should be borne by the estate. He also submitted that the appeal did resolve some practical problems which the judgment below may have occasioned to the administration of the estate. In this connection, he said at para 25 of his submissions on costs:

“Success in resolving practical problems inherent in Poon J’s judgment
24. Poon J’s judgment gave rise to severe practical problems in relation to which the Foundation acted appropriately in seeking the opinion of the Court of Appeal. These problems are set out in paragraphs 22 to 25 of the Foundation’s primary skeleton argument and include the following:
24.1 A very restrictive view was taken by Poon J of the Chinese Prize Provision requiring the Foundation to administer a trust ultra vires its memorandum;
24.2 The judgment left it unclear how the Foundation could administer the Clause 4 trust powers without again acting ultra vires its memorandum; and
24.3 Poon J took a restrictive view of Clause 3 introducing a restraint on alienation.
25. By judgment of the Court of Appeal all three such problems have either been resolved in the Foundation’s favour or at least amelirorated:
25.1 At paragraphs 121 to 126 the Court of Appeal concluded that Poon J applied an unduly rigid approach in relation to the Chinese Prize Provision and that in administering this trust (as held by Poon J and affirmed by this Court) the Foundation did not have to act ultra vires;
25.2 At paragraph 128 the Court of Appeal explained why the Foundation could administer the Clause 4 trust powers without acting ultra vires its memorandum; and
25.3 At paragraph 74 the Court of Appeal made clear that Clause 3 did not introduce a restraint on alienation and in that regard (insofar as Poon J perhaps unwittingly went too far) respectfully differed from him.”

6. On the other hand, Mr Taube QC submitted on behalf of the Secretary that it is only in exceptional cases where, despite an appellant being unsuccessful, the court will order the costs of an appeal to be borne by the estate. Counsel submitted there is no justification in the present case to do so. He contended that in substance, the appeal was brought by the Foundation as an adverse application in asserting that it is the absolute legatee under the Will. As such, it is a case within or analogous to Buckton category 3.

7. It was further submitted by Mr Taube that the appeal does not bring about any benefit to the estate or the charity. The large size of the estate by itself cannot be a sufficient reason for the bringing of an appeal to have a second opinion. In the present case, regardless of whether the estate is held by the Foundation on trust or given to it absolutely, it has to be applied ultimately for charity. It was suggested that the real purpose of the Foundation in pursuing the appeal was to seek to maximise the extent of the discretion available to the governors of the Foundation.

8. With regard to the difference in the reasoning between the judgment below and our judgment, Mr Taube submitted that those are matters that could be canvassed at stage 2 of the originating summons instead of incurring the costs of the appeal.

9. If costs were ordered against the Foundation, in view of the charity status of the Foundation, the Secretary reserved the right to apply to join the governors as parties for the purpose of seeking an order they should be personally liable to bear the costs to the extent that it is not recoverable from the Foundation and to reimburse the Foundation for the costs it had to pay.

Our views

10. Though it is correct that, subject to the provisions in Clause 4, the estate should be applied for charitable purposes, there are practical differences in how it would be administered if the bequest to the Foundation is an absolute one as compared with the bequest being passed to it as trustee. We are of the view that it is in the interest of the estate that the issue should be resolved. Thus, no-one would dispute the order of Poon J below on costs, viz costs of all the parties be borne by the estate, as it is a Buckton category 2 situation.

11. Was the position different on appeal? As observed by Clauson LJ in Re Stuart [1940] 4 All ER 80 at p.81, whilst there is no doubt that the court does have the power to make a similar costs order on appeal, such power is only to be exercised in the proper cases. Clauson LJ went on to observe that such cases would be exceptional. We prefer to say that the making of such order must be the exception rather than the general rule. The reason for so saying can be found in Lewin on Trusts 18th Edn para 21-84:

“…The reason for this is that the order made at first instance operates to protect and indemnify the trustee and there is no need for him to appeal.”

12. In our view, the crucial issue in the present context is whether the appeal can be said to be brought properly for seeking the guidance of this court notwithstanding the judgment below. Though it is fair to say that we do not differ from Poon J on the main issue as to the nature of the bequest, we agree with Mr Hinks that this is a proper case for the parties to seek further clarifications from this court on various aspects of the case which we have discussed in our main judgment. We say so not only because of the size of the estate (which is also a significant factor), but also because some of the issues we discussed in our main judgment have not been fully canvassed in the judgment below (perhaps due to the fact that arguments from counsel were not as well developed at that stage as those advanced before us) and some really difficult points are involved. By way of example, the nature and effect of the powers under Clause 4 are by no means straightforward questions.

13. Further, though the issues identified at para 25 of Mr Hinks’ submission were not at the centre of the appeal, they did present problems to the Foundation if it were to administer the estate as trustee and the Foundation was entitled to come to this court to seek guidance. We do not agree that the Foundation should leave those issues to stage 2 as there could be issue estoppel implications.

14. In our judgment, the Foundation was justified in seeking a second opinion from this court on the various issues decided in our main judgment and in that sense the guidance provided by this court is of benefit to the estate.

15. In the circumstances, we order that the costs of the Foundation, the Secretary and the 1^st Defendant be borne by the estate, to be taxed on trustee basis. There will be certificate for three counsel for the Secretary and certificate for four counsel for the Foundation.

(M H Lam)
Vice President

(Peter Cheung)
Justice of Appeal

(Susan Kwan)
Justice of Appeal

Mr Simon Taube, QC, Mr Ambrose Ho, SC, and Mr Michael Yin, instructed by Department of Justice, for the Plaintiff

Mr Anson Wong, instructed by Allen & Overy, for the 1^st Defendant

Mr Frank Hinks, QC, Mr Patrick Fung, SC, Mr Johnny Ma and Mr Jeremy Chan, instructed by Wilkinson & Grist, for the 2^nd Defendant

[1]Re Buckton [1907] 2 Ch 406 p.414 to 415