YEUNG, ABRAHAM v. SUN KING KAI

HCA 413/2015

[2022] HKCFI 1239

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 413 OF 2015

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(By Original Action)

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(By Counterclaim)

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JUDGMENT

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1.  This adverse possession case concerns two properties situated on the 5^th Floor of the two adjoining blocks of flats, namely Nos 7 and 5 of Soares Avenue, Kowloon (collectively “the Building”). In the chronological order of their acquisition by the registered owner, the late Kong Tuen (or Duen) Yee (“Kong”), they are referred to herein as “the 1^st Flat” (ie, No 7) and “the 2^nd Flat” (ie, No 5) or collectively “the Flats”. The Flats have since the mid-1960s been existing and used as a combined unit.

2.  The plaintiff (by original action) (“Yeung”) claims adverse possession of the Flats whereas the defendant (by original action) (“Sun”) defends the claim in her capacity as the executrix of the estate of Kong.  Sun counterclaims for, amongst others, vacant possession of the Flats.  For that, the occupiers of the Flats were joined as the 2^nd defendant. Because the counterclaim of Sun is also based on what she claims to be a charitable trust in respect of the Flats, the Secretary for Justice (“SJ”) was joined as the 3^rd defendant.

Background

3.  Kong was a movie actress well known in the 1950s in Hong Kong by the screen name of 梅綺.  By the late 1950s, Kong was known to have become a devout Christian.  By an assignment dated 1 May 1959, Kong became the registered owner of the 1^st Flat. Kong soon started to run her family church and holding gospel gatherings there.

4.  In 1963, Kong founded the Grace of Jesus Christ Crusade (基督靈恩佈道團).  She and her co-workers started preaching in Hong Kong as well as Singapore and Malaysia.  In the same year, she named the family church and its congregation as the Church of Hong Kong (香港教會).  She also published her book “the Collection of Life Testimony” (《生命証道集》) (“the Book”) setting out in detail a first-hand account of her path to religious conviction and the founding of the Church of Hong Kong.

5.  In her own Chinese writings dated 1964 (“the 1964 Writings”), Kong described herself as the custodian of the 1^st Flat being the “Holy Place of God”.  While her family and some co-workers of the church also resided there, the 1^st Flat, as Kong declared in the writings, had been dedicated for use to advance Christianity.  Various persons were named as the co-managers of the 1^st Flat.

6.  On 6 December 1965, Kong became the registered owner of the 2^nd Flat which, as mentioned, was the adjoining unit of the 1^st Flat on the same floor of the Building.  Kong soon caused the common partition wall between the Flats to be demolished and combined them into a single unit.  Her family and some co-workers continued to reside, and they continued to run the church, in the combined unit.

7.  Less than 3 months later, Kong made her last will on 22 February 1966 (“the Will”) whereby she apparently bequeathed the Flats to 7 persons as joint tenants.  All of them, including Sun and Hong Sung Chin (“Hong”), were co-workers of church and not related to Kong except for one, namely Kong’s daughter Ruth Cheung (“Cheung”) who was born out of Kong’s marriage with another well-known actor Cheung Ying or 張瑛.  The daughter was then about 23 years old.  Kong named Sun and Hong as the executors of her Will.

8.  Kong passed away on 17 August 1966.  Probate of her estate was granted to Sun on 31 August 1968[1].

9.  After the passing of Kong, the Flats continued to be used for running the church.  There was never vesting of the beneficial interest in the Flats in any of the beneficiaries of the bequest under the Will even as of today.

10.  In 1975, Sun emigrated to the US.  Cheung was effectively left in charge of the church at the Flats.

11.  In 1979, a number of church members including Cheung resolved to leave the Flats and congregate elsewhere, eventually under the name of the Christian Philadelphia Church (香港非拉鐵非教會).  That left the other existing church members, including some of those named as the beneficiaries of the bequest of the Flats under the Will and Madam Liu Lai Chun (“Liu”), to continue to congregate at the Flats.  Hong and a couple of others subsequently also left.  Amongst those staying church members, Liu became the key holder and person in charge.

12.  Liu at some point renamed the church at the Flats to Christ Disciple’s Church (基督信徒教會).  With her in running the church under the new name was her son Koo Chiu Ming (“Koo CM”) and others.  The church in that name continued in the 1980s and 1990s.

13.  Yeung came to know Liu and the Christ Disciple’s Church at the Flats through the introduction of third parties in the mid-1990s.  He was at the material times and still is a pastor.  Upon the invitation of Liu, Yeung started to hold religious service at the church at the Flats.

14.  In September 1996, Liu handed over the management and affairs of the church to Yeung, the exact extent and details of which are in dispute.

15.  Liu passed away on 1 November 1996.

16.  Yeung did continue to provide church service at the Flats.  At some point, Yeung apparently renamed the church there to Christ Great Commission Church (基督大使命教會).

17.  In 2015, Yeung got married.  It was in the same year when he instructed his then solicitors to issue a letter to Sun in February asserting for the first time adverse possession of the Flats for 20 years, ie since 1995.  Yeung followed by commencing the present action in the same year.

18.  The trial of this case was postponed from March 2020 because of the last general adjournment of court proceedings occasioned by the coronavirus pandemic.  At one point, Yeung became unrepresented.  Shortly before the present trial, his current solicitors came on record to act for him, and he appeared by counsel at the trial.

19.  As the SJ is not involved in the dispute and no relief is claimed against her, she was excused from taking part in the trial except for assisting the court by way of written submissions on the issue of charitable trust.

Yeung’s claim

20.  Yeung pleaded the following case in his re-amended statement of claim:

(1)  He has since late 1996 been occupying and living at the Flats.

(2)  Upon the said occupation, he caused a lock to be installed at the door of the Flats, and he has been paying all the outgoings in relation to the Flats since then.

(3)  He has decorated, maintained and furnished the Flats on divers occasions at his own expenses.

(4)  Since the said occupation, the Flats have been in his sole and exclusive possession.

21.  Based on the above, Yeung claims to have dispossessed the estate of Kong by way of adverse possession in excess of 12 years and to have extinguished the title of the estate of Kong in the Flats pursuant to sections 7 and 17 respectively of the Limitation Ordinance, Cap 347 (“LO”).

Case of Kong’s estate

22.  According to Sun, Kong became a devout Christian while seriously ill in 1957.  After her purchase of the 1^st Flat, Kong started a gospel family gathering in it every Thursday night.

23.  Since around September 1959, Kong dedicated herself to serving God and began giving sermons in the pulpit installed in the 1^st Flat.  She soon started running a small church at the 1^st Flat, which she later named Church of Hong Kong as mentioned above.  The congregation grew rapidly from around 30 to over 100 people.

24.  In 1962, as a solemn ceremonial act of her dedication of the 1^st Flat to the religious purposes of preaching the gospel and doing God’s work, Kong prayed in a special gathering of her co-workers and fellow Christians at the 1^st Flat and took out the title deeds of the 1^st Flat as a token of such dedication.  After that, Kong moved out of the biggest room she used to occupy in the 1^st Flat, and offered it to 2 of her co-workers, namely Hong and Hoan Sew Siong who worked for her ministry on a daily basis.  Kong moved to live modestly in the smallest room behind the kitchen.  She also converted another room into a dedicated prayer room for church goers at the flat.

25.  In 1963, Kong published the Book, which was distributed through the Grace of Jesus Christ Crusade among Christians in Hong Kong including Kong’s co-workers, church members and congregation.  The Book, amongst others, made clear to its readers that Kong had dedicated the 1^st Flat to God as His Holy Temple for the Purposes.

26.  In 1964, Kong produced her writings in Chinese consisting of 3 sheets, which were dated 30 July 1964 and signed by her, ie the 1964 Writings mentioned above.  By the 1964 Writings, Kong declared that she was the trustee/custodian of the 1^st Flat, which she described is the Holy Temple under the name of God, for preaching the gospel and for the members of the Church of Hong Kong to congregate until it was God’s will that the 1^st Flat should be sold, but in that event the proceeds of sale must be used for the work of preaching the gospel for the “Blood, Water and Holy Spirit” (collectively “the Purposes”) and must not be used for any other purposes except for purchasing a better place for the preaching of the gospel.

27.  Sun contends that a charitable trust was by then created in respect of the 1^st Flat.

28.  With the expansion of the Church of Hong Kong mentioned above, the 1^st Flat became inadequate to accommodate the congregation.  Kong then chose and purchased the 2^nd Flat adjoining the 1^st Flat.  The purchase was completed on 6 December 1965.  Soon afterwards, Kong caused the demolition of the common partition wall of the Flats, and combined the units as one for her ministry.  Sun contends that the 2^nd Flat became for all intents and purposes an annex and extension of the 1^st Flat subject to the charitable trust for the Purposes.

29.  Against the above background, the express and unequivocal intention of Kong in respect of the use of the Flats is said to be known by the co-workers and members of the church as well as the congregation.  

30.  On numerous occasions between 1959 and early 1966, when Kong was delivering sermons and testimonies to her co-workers, church members and congregation, Kong reiterated that she had dedicated the 1^st Flat, and later the Flats, to God as His Holy Temple for the purposes of preaching the gospel, praying, worshipping and congregating, ie the Purposes.  Kong also reiterated the 1^st Flat, and later the Flats, belonged to God and not her, and she would hold and look after the Flats as a steward and would use the Flats for the Purposes.

31.  On numerous occasions before and up to the execution of the Will in early 1966 (as evidenced by the 1964 Writings), Kong repeated the above declaration as well as admonished and urged her co-workers to hold and look after the Flats as God’s stewards and used the same for the Purposes.

32.  On numerous occasions between 1959 and early 1966, Kong also admonished her own children that no legacy would be left by her to them because she had nothing (except God).  She urged her children to revere God.

33.  Then Kong made the Will in 1966.  Before and after the making of the Will, Kong had admonished Sun and the persons named in the Will that they must look after the Flats as good stewards and use them for the same purpose as she had.  Given such specific instruction of Kong and the context, neither Kong nor the beneficiaries named in the Will (or their survivors or ultimate survivor) would assume any beneficial interest in the Flats.

34.  It is said that the designation of Kong’s co-workers of Church of Hong Kong as joint tenants of the Flats by the Will, and hence the operation of the right of survivorship amongst them, evidences the clear intention of Kong that the Flats would be held on charitable trust without disruption occasioned by the passing of any of them.

35.  After Kong passed away on 17 August 1966, the dedication and use of the Flats for the Purposes continued.  Sun left Hong Kong to emigrate to the US in 1975.  Before that, Sun consulted solicitors about her intention of appointing Cheung to act as executrix of the Will in her place, and mistakenly believed that that was or would be effected.

36.  In any event, Cheung remained at the church at the Flats until 1979 when she and some members of the church resolved to congregate elsewhere as eventually the Christian Philadelphia Church mentioned above.  The remaining about 20 members of the church at the Flats then included Hong, Hoan Sew Siong and Leong Lye Ngor, who were 3 of the named beneficiaries of the Flats under the Will, as well as Liu.  Sometime later, Hong, Hoan Sew Siong and Leong Lye Ngor also left the congregation at the Flats.

37.  In the above circumstances, Liu, as co-worker of the ministry became entrusted with the keys to the Flats and the charge of the church at the Flats. It was she who subsequently renamed the congregation at the Flats as Christ Disciple’s Church, which continue to operate in the following decades.

38.  It is the case of Sun that Yeung joined the congregation at the Flats as pastor at Christ Disciple’s Church in about 1994 upon the invitation of Liu.  When Liu became seriously ill in 1996, Yeung frequently prayed for her by her side to help relieve her pain and suffering.  On 22 September 1996, Liu entrusted to Yeung with the running of the church at the Flats, which was in line with the Purposes.  She also handed the keys to the Flats to Yeung.  Liu passed away on 1 November 1996.  Yeung conducted the funeral service for Liu at the funeral parlour, which was attended by Liu’s family members and members of the congregation of Christ Disciple’s Church.

39.  It was against such backdrop that Yeung came to move into the Flats subsequently.  Sun contends that even after that and up to the end of 2014, the Flats have consistently and continuously been used in line with the express trust and the Purposes.

40.  In respect of what happened to the church at the Flats after the 1970s, Sun also relies on the evidence of Liu’s daughter (and elder sister of Koo CM) Koo Suet Ming (“Koo SM”).  Amongst others, Koo SM visited Yeung at the Flats in December 2014 and personally witnessed the state of and the activities at the Flats.  Mr Yung Wing Ki (“Yung”) was amongst those former members of Church of Hong Kong leaving to form another congregation out of the Flats back in 1979.  Yung personally visited Yeung at the Flats in 2004.  After the commencement of the present action, Yung also met with Yeung more than once in 2015.

41.  In these circumstances, Sun contends that at all times until Yeung came to assert his claim in early 2015, all the persons concerned have shared a similar understanding that the Flats were and would only be used for the Purposes in line with what Kong declared decades ago.  As a pastor, Yeung came to have the use, and has in fact used, the Flats against such background.  On this basis, Sun disputes that Yeung had at any material time the requisite exclusive possession and the intention of adverse possession of the Flats in his own name and for his own right to the exclusion of the world.

42.  Apart from denying Yeung’s claim, Sun for and on behalf of the estate of Kong also counterclaims for:

(1)  a declaration that she held and holds the Flats on charitable trust for the advancement of Christianity (the “Trust”) on an implied condition that any person within the class of beneficiaries under the Trust or otherwise granted the licence or permission to enter upon or to use the Flats shall not do or attempt to do or take part or aid or abet in doing anything that may or may threaten to deny the Trust or frustrate or obstruct the purpose of the Trust;

(2)  possession of the Flats; and

(3)  injunction restraining the defendants from entering upon or remaining in the Flats or otherwise obstructing the Purposes, and

(4)  mandatory injunction compelling the defendants to remove the things and personal belongings brought into the Flats or else they would be removed and disposed of.

43.  Whilst pleaded, the claim for damages for trespass is not pursued.

Yeung’s reply

44.  Yeung denies that Liu handed the keys to the Flats to him.  He repeats that he allegedly had locksmith opened the doors to the Flats and then changed the locks after he has gained entry.  He has since moved in his own furniture and personal belongings, and been residing there. He claims to have since commenced the requisite exclusive possession of the Flats.

45.  Yeung further pleaded that he removed the signboards of Christ Disciple’s Church, and started his own preaching circle for the people in the neighbourhood in about 1997.  Further, Sunday service at the Flats became further less since 2000 when Yeung also started to operate a farm in the Mainland.

46.  Yeung denies the existence of the trust in respect of the Flats.  As to the 1^st Flat, it is contended that the Chinese Writings were too equivocal and ambiguous to give rise to the alleged trust.  As to the 2^nd Flat, the alleged trust is said to be ineffectual and invalid for the lack of writing pursuant to section 5(1)(a) of the Conveyancing and Property Ordinance, Cap 219 (“CPO”). Alternatively, the absolute bequest of the Flats by the Will also terminated or nullified any charitable trust in respect of the Flats.  It is also contended that following the abandonment of her role as executrix upon emigration as well as the departure and relocation of Cheung’s congregation by the late 1970s, the alleged trust would have ceased to subsist as a matter of fact.

Issues

47.  It is for Yeung to prove that he has been in adverse possession of the Flats as alleged, so that the paper title of Kong’s estate in the Flats has been extinguished.  As the registered owner of the Flats, the estate of Kong is not required to disprove anything or to prove a title better than that of Yeung.

48.  The factual allegations by Sun in respect of the alleged charitable trust form the context and circumstances in which the exclusive factual possession and the requisite intention of adverse possession alleged by Yeung are to be tested.  If Yeung fails in discharging his burden to prove these pre-requisites of adverse possession in the circumstances, Kong’s estate should be entitled to the vacant possession of the Flats, regardless of whether or not she succeeds in establishing the legal existence of a charitable trust.

49.  Of course, if the legal existence of the alleged charitable trust is established, Kong’s estate should be further entitled to the declaratory relief in respect of such trust for not merely the past but also future purpose.  In that event, counsel for Sun indicates that further submission, including that from the SJ, may be necessary to enable a properly termed order to be made.

Adverse possession

50.  Section 7(2) of the LO provides that no action shall be brought by any person to recover any land after the expiration of 12 years from the date when the right of action accrued to him.  Section 17 provides that so barred from recovering the land, the title of that person to the land shall be extinguished.

51.  In Shine Empire Ltd v Incorporated Owners of San Po Kong Mansion [2006] 4 HKLRD 1, the Court of Appeal (referring to JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419) had this to say at §28:

“… it is still necessary for the party (‘the squatter’) claiming that it has dispossessed the paper title owner to prove two separate elements: (1) a sufficient degree of factual possession in the sense of physical control, and (2) an intention to possess. To establish factual possession, the squatter has to show absence of the paper title owner’s consent, a single and exclusive possession and such acts as demonstrated that in the circumstances, in particular, the nature of the land and the way it was commonly used, it had dealt with it as an occupying owner might normally be expected to do and that no other person had done so (para. 41). To establish an intention to possess, the squatter has to show that he intended to occupy and use the land as his own (para. 71), to exclude the world at large, including the paper title owner, so far as was reasonably possible.”

52.  Insofar as the requisite intention is concerned, this involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the process of law will allow: see Incorporated Owners of San Po Kong Mansion v Shine Empire (2007) 10 HKCFAR 588 (citing Powell v McFarlane (1979) 38 P&CR 452).

53.  Insofar as exclusive factual possession is concerned, this is a matter of fact and degree depending on the circumstances including the nature of the land and acts that manifest possession and control.  It must be single and exclusive, and the squatter has been dealing with the land as an occupying owner might have been expected to deal with it, and that no one else has done so: see Powell (above) at pp.470-471; JA Pye (Oxford) Ltd (above) at §41.  This would be where the owner, in view of the assertive steps taken by the squatter in dealing with the land, would realise that the squatter was not merely a trespasser but someone unequivocally seeking to take possession of the land from him: see Butler v Dickson [2018] VCC 610 at §148.

54.  The evidence adduced in support must be clear and compelling: see Wu Yee Pak v Un Fong Leung & Ors(2004) 7 HKCFAR 498 at §5.  The factual possession and the requisite intention must be demonstrated to have been unequivocal: see Pflug v Collins [1952] OR 519.  The court requires clear and affirmative evidence that the trespasser, claiming that he has acquired possession, not only had the requisite intention to possess, but made such intention clear to the world.  If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animuspossidendi and consequently not having dispossessed of the owner: see TheIncorporated Owners of San Po Kong Mansion (above).

55.  The required intention must be determined objectively.  Evidence of the squatter’s past or present declarations as to his intention is regarded as self-serving: see Powell v McFarlene (above) at pp.476-477:

“Though past or present declarations as to his intentions, made by a person claiming that he had possession of land on a particular date, may provide compelling evidence that he did not have the requisite animus possidendi, in my judgment statements made by such a person, on giving oral evidence in court, to the effect that at a particular time he intended to take exclusive possession of the land, are of very little evidential value, because they are obviously easily capable of being merely self-serving, while at the same time they may be very difficult for the paper owner positively to refute. For the same reasons, even contemporary declarations made by a person to the effect that he was intending to assert a claim to the land are of little evidential value for the purpose of supporting a claim that he had possession of the land at the relevant date unless they were specifically brought to the attention of the true owner.”

The final court in Wong Tak Yue v Kung Kwok Wai David (1997-98) 1 HKCFAR 55 also said (at 69A-C):

“Where the occupier has made self-serving statements as to what was his intention, whether during the period of occupation or when challenged in legal proceedings, the courts should approach them with some scepticism. The courts would scrutinise the circumstances in which they were made and would give them such weight if any as they may deserve. Conversely, where the occupier has made statements as to what was his intention and such statements are against his interest, the courts would usually accord to them considerable weight.”

Charitable trust

56.  The parties’ submissions reflect consensus on the principles regarding charitable trusts.

57.  In the UK, the advancement of religion is a recognised charitable purpose, at least where there is an element of public benefit: see The Commissioner for Special Purposes of the Income Tax v Pemsel [1891] AC 531; Gilmour v Coats [1949] AC 426.  The position in Hong Kong was explained by the Court of Appeal in Cheung Man Yu v Lau Yuen Ching & Others [2007] 4 HKC 314:

(a)  Public charity means a charity in its legal sense.  It is public in the sense that it must exist for the benefit of the public or a section of the public.  The purposes of the institution must have a charitable character.  (§§24-26; 45-46)

(b)  A trust for a religious purpose must be shown to have some element of public benefit in order to qualify as a charitable trust.  The Court is entitled to assume that some benefit accrued to the public from their attendance at places of worship.  (§§72-73; 75)

(c)  A charity is not defined by its scale or resources.  A legal (and public in this sense) charity may be small and run by one or a few people.  It does not have to be a public organisation. The fact that the property under the trust is modest does not detract from its essential religious character.  (§§63 & 90)

(d)  The Court will not consider that the advancement of religion will fail to qualify as a public charity unless it is advertised.  (§35-40)

(e)  There is nothing inconsistent with a legal charity for the keeper of the establishment and her disciples to reside on the premises.  Their accommodation is incidental to the true purpose of the charity, namely the advancement of the religion.  (§60)

(f)  Although subsequent events or conduct may throw light on whether a charitable trust has been established, they could not by themselves convert a properly constituted charitable trust or its assets into a private trust or private property.  (§46)

58.  An activity which by itself is not charitable or for public benefit would not have the effect of subverting the charitable purpose if the activity can be properly regarded as being part of the means or consequences of carrying out the charitable purposes which are the ends: see Re Tsing Shan Monastery [2003] 1 HKLRD 237 at §17.12. Examples include social and educational activities: see Neville Estates Limited v Madden [1962] Ch 832 at 851-3.

59.  It does not matter that the donors or the title holders did not appreciate the legal consequence of the dedication of the property to charitable purposes: see Ma Wah Yan & Another v Dharma Realm Buddhist Association, Inc & Others CACV 179/2016 (2 March 2017) at §23.

60.  Trust that concerns land brings about the consideration of the application of section 5 of the CPO, which provides that:

“ (1) Subject to section 6-

(a) no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

(b) a declaration of trust respecting land or any interest therein shall be manifested and proved in writing signed by the person who is able to declare such trust or by his will.

(2) This section does not affect the creation or operation of resulting, implied or constructive trusts.”

61.  On behalf of Sun, the applicability of the provision is questioned on the basis that the CPO came into effect on 1 November 1984, which was some two decades after the creation of the alleged trust in the present case.  Yeung has not properly, if at all, put forward any basis for the retrospective application of the provision or any other applicable law with similar effect that could affect the validity of the trust in respect of the Flats allegedly created back in the mid-1960s.  Counsel for Sun suggests that the Statute of Fraud 1677 may be applicable but nevertheless would not assist Yeung’s case.  This will be discussed below.

62.  In the cases cited by the parties, such as Li Kim Sang Victor v Chen Chi Hsia[2016] 1 HKLRD 1153, the court did say that a charitable trust of land, in order to be valid, must be declared and proved in writing signed by the person capable of declaring such trust, or be declared and proved by a will made by that person pursuant to section 5 of the CPO.  However, the issue of the applicability of the provision to a trust created prior to the coming into effect of the CPO was not raised or argued.  In any event, the court invariably referred to section 5(1)(b) of the CPO.  Therefore, even assuming that the CPO applies, Yeung’s pleaded reliance on section 5(1)(a) as opposed to 5(1)(b) is questionable.  In court, counsel for Yeung described that as a mistake in the pleading, and indeed sought to rely on section 5(1)(b) instead.

63.  What the court said in Li Kim Sang Victor (above) with reference to section 5(1)(b) of the CPO, assuming that it applies to the alleged creation of the trust in the present case, goes to the validity or legal existence of a charitable trust over land.  However, it has also been made clear that 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 in those circumstances: see Ma Wah Yan & Another v Dharma Realm Buddhist Association, Inc & Others HCA 1192/2007 (3 August 2016) at §18; and on appeal Ma Wah Yan & Another v Dharma Realm Buddhist Association, Inc & Others at §23 where the formation and existence of a public charity was recognized as a matter of fact.

64.  Understood this way, this court does not consider that there is necessarily any controversy in principle.  As mentioned above, for the purpose of resisting the claim of adverse possession, particularly in respect of the issue of the animus possidendi, Sun may rely on the formation and the known existence of the alleged charity over the use of the Flats as a matter of fact over the decades, whether or not she also succeeds in establishing the charitable trust over the Flats as a legally enforceable one.

The witnesses

65.  Besides Yeung himself, Mr Wu Ping Fan (“Wu”) and Mr Lo Chi Keung (“Lo”) gave evidence for him.  Wu is Yeung’s friend who has visited Yeung at the Flats over the two decades since 1997 while Lo has been a churchgoer at the Flats since 2000.  The other witnesses for Yeung were not called, and their witness statements are therefore disregarded from the evidence.

66.  In the midst of the pandemic and international travel limitation, this court gave leave last year to Sun and the other witnesses resident in the US to give oral evidence at the trial via videoconferencing facilities of the court from the US[2]. The circumstances have since changed in that these witnesses made their effort and succeeded in coming from the US to attend the trial in person.  They included Sun herself (who is nearly 90 years old), Cheung and Koo SM mentioned above.  Another witness for Sun was not called, and his witness statement is likewise disregarded from the evidence.

General observations

67.  Before turning to the specific issues, I have the following observations which, in my judgment, are justified by the evidence and the circumstances of the case.

68.  First, the Will contains peculiar features.  The Will addressed the Flats without mention of any other asset of Kong at all.  Nor was there mention of how the liabilities or expenses of the estate upon her death were to be discharged.  The Will appears to serve the single purpose of putting the Flats into the hands of the named persons.  Of them, Sun and Hong, the executors, were expressly described as members of The Grace of Jesus Christ Crusade.  All of them were co-workers of the church at the Flats at the time.  Cheung is the only one related to Kong.  As mentioned below, Kong also had another son and daughter born out of her relationship with another person, but neither of them was named as beneficiary under the Will.  Instead they were named as the co-managers of the 1^st Flat for the church there in the 1964 Writings.  On the face of the Will, Kong named the beneficiaries of her bequest of the absolute beneficial interest in the Flats.  However, they were named as joint tenants, thus entailing the operation of the right of survivorship till the last of them.

69.  Second, there is no suggestion or reason to believe that the various beneficiaries named in the Will were not aware of the bequest.  The evidence is that they were all aware.  None of them has ever asserted his or her entitlement to be vested with the beneficial interest in the Flats ever since the passing of Kong in 1966.  Nor has any of their successors at any stage.  Had this been an ordinary disposition of beneficial interest in landed property in Hong Kong by will, this would have been unusual.  Such reality per se tends to lend weight to the alleged understanding of these persons that none of them was ever intended to derive personal and beneficial interest in the Flats as the bequest under the Will on its face suggested.

70.  Third, apart from obtaining the grant of probate, and keeping and allowing the Flats for their use as before, Sun has not taken any step to deal with the Flats as the executrix.  This remained to be the case when she left Hong Kong for the US in 1975.  According to Sun, which was not really controverted during the trial, she consulted solicitors with a view to having Cheung to take over her executorship of the estate of Kong.  Yet nothing suggests that it was because of the concern about distribution of the estate amongst the beneficiaries under the Will, which could or would have happened by then.  The fact was that nothing materialized, whilst Sun somehow believed that she has since her departure from Hong Kong ceased to be the executrix.

71.  Fourth, there is documentary evidence that in 1986, Koo CM wrote to Sun under the letterhead of Christ Disciple’s Church in connection with the intended application for property tax exemption concerning the Flats.  That was when Liu, his mother, still had the management of the church at the Flats.  Koo CM himself wrote that Christ Disciple’s Church (so named by Liu) was formerly the Church of Hong Kong (set up by Kong).  The church had never been registered for property tax exemption.  In order to enable that to be done, he requested Sun to issue a declaration in her capacity as the executrix of the estate of Kong to verify the background and nature of the use of the Flats.  Sun acceded to the request and made a declaration before the Notary Public in the US in the same year.  The declaration served to confirm that until her departure from Hong Kong in the 1970s, the Flats were at all times used by Church of Hong Kong (and in her own words) “for non-profit and non-commercial purposes as willed by the late, KONG DUEN YEE alias KONG TUEN YEE”.  In the same declaration, Sun also referred to the transfer of executorship at the lawyers’ office in Hong Kong and the cessation of her role as executrix ever since as mentioned above.  That had to be a misunderstanding.  Her mistaken belief in this respect, I find, did exist.  It was not abandonment of her role as such as Yeung now contends.

72.  Fifth, in such representative or trustee capacity, Sun defends Yeung’s claim for the estate of Kong.  So is she in counterclaiming for the possession of the Flats.  She did what it took in terms of the travel and its aftermath upon her arrival in the known prevailing circumstances in order to attend the trial in Hong Kong.  So did Koo SM and Cheung who have all emigrated to the US in the 1980s.  There is no suggestion or reason to believe that the return of Sun and Cheung to attend the trial was motivated by the apparent beneficial interest in the Flats under the Will, which neither of them has ever asserted before.  The fact that Sun would care to seek declaratory relief subjecting the Flats to a charitable trust negatives any intention of personal gain from the present litigation.  As to Koo SM and Yung, they are very much independent witnesses who have no personal interest in the outcome of this litigation.

73.  Sixth, the relevant evidence of the witnesses will be discussed further below.  However, insofar as performance in the witness box is concerned, Sun is by any standard a remarkable old lady who impressed this court with her composure and evidence in a fair and spontaneous manner. Cheung’s evidence was spontaneous and straightforward, which was also fair and firm.  Koo SM presented her genuine effort to recall events, and this court detected no indication of attempt other than that to tell the truth.  In his evidence, Yeung attempted to paint the picture that Koo SM was not in a position to testify as to her mother’s affairs or running of the church at the Flats on the ground that the mother and daughter relationship has for long fallen foul as a result of the alleged scandalous deeds of Koo SM.  This was flatly contradicted by the evidence of Koo SM, which was corroborated by contemporaneous documentary evidence of the relationship between the mother and daughter in the 1980s to the 1990s.  As to Yung, he was simply firm, straightforward and fair in his evidence.

74.  Seventh, Yeung claims for his personal interest.  One may say that his claim for possessory title of the Flats is not necessarily inconsistent with any intention on his part to use the Flats for charitable purpose similar to what the Flats have been used for.  However, the evidence discussed below suggests that Yeung’s claim was triggered by offer for acquisition of the Flats by developer by or in 2015 for the intended redevelopment of the site where the Building is. In other words, the basis for considering the possible co-existence of the personal property claim by Yeung and the intention on his part to maintain the Flats, let alone to use them for charitable purpose, is extremely doubtful.

75.  Last, Yeung’s case, and more importantly his evidence in court, disseminated self-consciousness in projecting issues that he might perceive as advantageous to his case and avoiding issues that he might perceive as disadvantageous to his case.  Nothing of that sort was detected in the evidence of his opponent’s witnesses.  These issues crucially relate to (i) how and when Yeung came to occupy the Flats; and (ii) use of the Flats since his occupation.

The Flats prior to Yeung

76.  The history and circumstances of the Flats prior to the time when Yeung entered the picture in about mid-1990s are matters that he possesses no personal knowledge about.  He did not testify as to any understanding acquired from Liu about such history and circumstances that would contradict the case of Sun.  The evidence of Sun and her witnesses in this respect, I find, were not effectively challenged at the trial.  The case of Sun in this respect as set out above, I find, stands for the facts.

77.  Of them, there was the express and repeated declarations by Kong of her dedication of the 1^st Flat for the service and preaching of gospel by her church.  Naturally, the various conduct and contemporaneous writings of Kong were scrutinized for the purpose of ascertaining her intention regarding the Flats.  One however should not lose sight of the personal background and experience of Kong by the late 1950s.  With those in mind, one would objectively be left with no doubt about Kong’s readiness and determination in what her conduct and writings suggested.

78.  The Book published in 1963 contained Kong’s own account of her life experience and intention.  Amongst other things, she wrote:

“…不久，主又為我將汽車，首飾，皮大衣，美衣…一樣一樣的剝去淨盡了。僅餘一幢頗為寬闊的小樓房，就是如今用來服事主的地方。一九五九年春，神吩咐我購買下來之時，我就已經把它完全獻上給神了；故此主權不屬我，乃是屬乎神的 感謝神！

…

…自從同工姊妹遷來之後，我心中一直被聖靈感動，覺得應當將屋契獻出交給神，好見證這地方完全是屬神的。一九六二年底的一天晚上，我在禱告中受到神的催促，立時將屋契交了出來。隨即又遷到廚房後面的最小房間 (以前是工友姊妹居住的)，將那原來住的寬大房間給了范洪兩位弟兄及兩孩子居住。…

…

…感謝神，衪恩待了我的孩子…神吩咐我對他們說 「你們不要再恃著母親還會有些什麼產業留下，你們的母親除了有神以外，甚麼都沒有，你們住在神的殿中…我沒有什麼能給你們的…”

79.  The above was very much an account of Kong’s own projection of determination to part with all her material wealth and possessions and the specific dedication of the 1^st Flat as “God’s Holy Temple” upon acquisition.  The intention was expressed in unequivocal terms, which were further evidenced by her admonition to her children that they were all living at where it belonged to God and could expect no inheritance from her.  Indeed, her perception of no wealth except for the 1^st Flat then was consistently manifested by the terms of the Will which addressed the Flats and nothing else of hers as observed above.

80.  The 1964 Writings in three versions, all dated 30 July as well as signed and stamped by Kong, specifically referred to the 1^st Flat. In one of them, Kong wrote:

“遵主耶穌基督囑咐：座落在香港九龍梭椏道七號六樓是稱為神名下之聖所，基督靈恩佈道團分發「血、水、聖靈」全備福音榮耀教會真理屬靈糧食之所在，萬國從此處得見真理光輝。目前香港教會兄姊聚會亦暫借此處地方，若神賜下更佳美所在，各方禱告後清楚神旨，便可出售，但售出金錢要完全用在傳揚 「血、水、聖靈」全備福音教會真理之聖工上，不可用在福音以外之事上，或可用在購置更佳美所在，使真道快快傳揚。必須得六人同意禱告後才可決定之。”

81.  In each version of these writings, Kong reiterated that the 1^st Flat had already been dedicated to God, and entrusted the power to manage and to deal with the property to persons, some of whom were named in the Will subsequently made in 1966.  Amongst others, there were Cheung, Kong’s other son and daughter mentioned above as well as Sun and Hong who were subsequently named as the executors of the Will.  In two of the three versions of these writings, there appeared to be subsequent supplementary writings in 1965 regarding change in the combination of these persons (‘the 1965 Variations”).

82.  The issue of whether the 1964 Writings were in fact signed by Kong was raised in the course of the oral evidence.  In the absence of any proper pleading, challenge of such nature was not legitimate.

83.  On behalf of Yeung, the 1964 Writings is also construed with a view to casting doubt on their meaning and thus the intention of Kong.  For instance, the choice of the description “暫借” (literally “on temporary loan”) is highlighted to suggest the lack of unequivocal and absolute dedication of the 1^st Flat for the purpose that followed such description in the writings.

84.  No doubt one should be careful in reading the writings and construing from them the intention of the maker who has passed away.  However, literal reading does not, as it should not, dictate, particularly in view of the religious nature of the expressions in the writings that Kong chose and intended to mean.  Properly read in context, the writings conveyed the intention of Kong that the congregation of Church of Hong Kong had the use of the 1^st Flat that she, at least subjectively, had already dedicated to God.  The 1^st Flat could be sold, but only if the proceeds of that would be utilized for a better location for the church or generally for the Purposes.  The intention as expressed did not fall short of absolute dedication of the 1^st Flat for the Purposes.  If anything, the entity extending the “temporary loan” of the 1^st Flat to the church that Kong perceived, as a matter of construction of the document, was God instead of herself.  Coupled with the evidence of Sun and Cheung in this respect, one should be left with no doubt about such intention and its manifestation on the part of Kong.

85.  The 2^nd Flat came to be purchased in 1965 subsequent to the above events and the written declarations of Kong.  This caused Yeung to seek to differentiate the status of the 2^nd Flat from that of the 1^st Flat in the context of the alleged trust.  Whether the 2^nd Flat should fall to be treated differently remains a matter of intention of Kong as manifested by her conduct.  Such conduct of Kong began with the whole idea of purchasing another flat, which was followed by her choice and utilization of it.

86.  The evidence suggests that the whole idea of purchasing another flat was not for the accommodation of Kong’s family but the expansion of the congregation. The choice of the 2^nd Flat effectively next door and the demolition of the partition wall between the Flats soon after its acquisition reinforced the intention of expansion of the existing church premises.  The 2^nd Flat was for all intents and purposes joined with the 1^st Flat.  It would be unrealistic to read any intention of Kong to differentiate the status and purpose of the Flats.  The positive intention of Kong manifested by her conduct in my judgment could not be clearer.  As to whether there was also valid declaration of the charitable trust in respect of the 2^nd Flat, this relates to the legal existence of the trust, which will be discussed below.

87.  The existence of the expressly declared charitable purpose for which the Flats should be used since the 1960s is also evidenced by how the persons concerned, including Sun and the beneficiaries named in the Will, have regarded the state of affairs throughout the decades.  The observations made in the earlier part of this judgment refer.

88.  Yeung raises the issue of change after the 1964 Writings (and the 1965 Variations).  It is also pointed out that at the back of all three versions of the 1964 Writings, there were handwritings “此紙作廢” meaning that the documents were rescinded or cancelled.  The documents, Yeung also argues, were superseded by the Will whereby Kong bequeathed the Flats to the named beneficiaries as joint tenants absolutely.

89.  As for the Will, whilst it literally served to bequeath the Flats of Kong to the named beneficiaries, it would in my judgment be wrong to ignore the intention of Kong by disregarding the circumstances prior to and surrounding the making of this legal document.  Context is key: see (by analogy) Fully Profit (Asia) Ltd v The Secretary for Justice (2013) 16 HKCFAR 351 at §15.  The observation made in respect of the peculiar features of the Will above refers.

90.  Further, what Kong stated in the Book regarding her assets and possessions, including the 1^st Flat, was not testamentary.  The dedication of them to God was intended to take effect immediately.  The 1964 Writings and the 1965 Variations came about in the same vein of the declared intention of Kong as recorded in the Book.  Rather than documents for disposition of the 1^st Flat, the writings served to document the intention of Kong in respect of its status as belonging to God and its management by the church as such.  Insofar as intention, instead of legal effect, is concerned, Kong could not intend the Will to undo her previously and consistently declared intention.

91.  Kong chose and acquired the 2^nd Flat for the reason and in the circumstances in December 1965 as discussed above.  She proceeded to make the Will less than 3 months later, which was soon after she had caused the Flats to become a combined unit for her church.  There is objectively no circumstance for anyone to believe that Kong would somehow change her mind and retract her declared intention regarding the Flats, especially when she made clear both to her children and for the record that they should expect no inheritance from her.  Any such suggested change of mind on the part of Kong, I find, is inexplicable in view of the sequence of events.

92.  As mentioned, the circumstances then as well as the choice and designation of the beneficiaries and the executors of Will were such that the apparent bequest of the Flats under the Will was as a matter of fact consistent manifestation of Kong’s intention to entrust the Flats to the named executors and the beneficiaries as trustees or “good stewards” instead of benefiting any one of them or their descendants absolutely.  This also lends weight to the evidence of Sun in respect of her understanding that the 1964 Writings (and the 1965 Variations) might be said to be cancelled simply because they would not be necessary in view of the Will serving the purpose for the future.  Whether or not the Will so prepared might achieve her purpose in the legal sense would not affect the existence of such intention as a matter of fact, when all the prevailing circumstances as manifested are considered as a whole.

93.  Equally that the title deeds in respect of the Flats were never actually delivered by Kong to any one of those named by her in the Will, in these circumstances, was immaterial.  Short of a legal requirement, unlike the case of gift of chattel, delivery or not of the title deeds in the present case remains no more than one of the circumstances suggestive of the intention of Kong.  The circumstances of the present case in this respect overwhelm the apparent lack of delivery of the title deeds to the intended trustees or custodians.  As Sun testified, it did not occur to any one of them concerned under the bequest that the title deeds were withheld by Kong.

94.  How the named beneficiaries have conducted for decades after the Will proves their similar understanding as that of Kong.  In 1986, Koo CM and Sun, as mentioned, corresponded with each other.  What the former wrote about the history of the Flats first used by the Church of Hong Kong and then Christ Disciple’s Church corroborated the case of Sun.  Koo CM’s request and consequentially Sun’s declaration constitute highly probative contemporaneous evidence of the continuous and consistent use of the Flats, not just the 1^st Flat, by the church and for the Purposes in line with the declared intention of Kong.

95.  Liu was left in charge of the church after Cheung and some church members left in 1979 to congregate at another location and eventually as another church.  Much is said on Yeung’s behalf about that episode.  However, the actual evidence does not show that that was an episode of breakdown of the church at the Flats.  Both Cheung and Yung gave convincing explanation of their state of mind about resolving to congregate elsewhere while ensuring that the remaining members of the church at the Flats could continue to congregate there.  That episode did not mark any truncation of the use of the Flats for the Purposes.

96.  The state of affairs generally continued when the Flats were under the de facto control of Liu since the 1980s, notwithstanding her renaming of the church at the Flats at one point.  There is no suggestion or evidence that Liu herself ever claimed any possessory interest in the Flats at any stage.  Any such suggestion would in any event be rebutted by the evidence of Sun and her witnesses, including Liu’s own daughter, Koo SM.  The same state of affairs continued to be what Yeung encountered when he came to know Liu in the mid-1990s.

How Yeung came to occupy the Flats

97.  The whole basis on which Yeung came to have access to the Flats could only have had to do with his role as a pastor.  In such capacity, he came to be introduced to Liu.  As such, he also started to hold service at the Flat upon the invitation or consent of Liu in the mid-1990s.  It is unrealistic to suggest that Yeung somehow possessed any understanding different from that of Liu about the history and purpose of the Flats mentioned above.  As mentioned above, there is also no evidence that Yeung acquired any understanding from Liu that was contrary to that of Sun and her witnesses regarding the use of the Flats.

98.  As mentioned, there is dispute as to when exactly Yeung came to occupy the Flats.  Yeung was obviously conscious and tactful about that.  When he first pleaded his case, Yeung alleged that he started to occupy the Flats in (and not about) 1995.  That was also what he asserted in his letter before action issued by his then solicitors in February 2015.  That would also be in line with Sun’s pleaded case that Yeung’s access to and occupation of the Flats was pursuant the consent of Liu prior to her death (whether or not it was indeed in 1994).

99.  Seeing Sun’s pleaded case above, Yeung amended his pleading specifically to alter the year in which he allegedly started to occupy the Flats.  He amended that to late 1996.  It is self-evident that the amendment served to ensure that Yeung’s occupation of the Flats commenced only after the death of Liu in November 1996 so as to change its bearing on the issue of consent of Liu.  His explanation in court of such change in a material aspect of his case was hardly convincing.  His theme throughout his answers to challenges regarding apparent lack or inconsistency of his evidence was invariably to attribute it to his legal advisers’ enquiries and advice at the time.

100.  Apparently in support of his case that he did not move into the Flats until 1997, Yeung referred to his alleged residence in another person’s place at Shatin during the period between 1995 and 1997.  Not to mention that this other person was not heard, Yeung’s evidence in court suggested that there was an overlapping period of (at least) months when he would stay at both locations.  He would also stay at the Flats prior to or during weekends for the preparation of the Sunday services of the church at the Flats during such period.

101.  In terms of documentary evidence, those disclosed, including the various utility bills and invoices concerning the Flats, were dated no earlier than early 1997, which was when Yeung claims to have commenced his occupation of the Flats.  In court, he explained that he was not responsible for keeping the records prior to early 1997.  It is doubtful whether that, even if true, serves to explain the non-existence of such kind of documents dated before early 1997 in the Flats.  The evidence did not suggest that there has been any clearance of such kind of documents upon the passing of Liu or prior to the arrival of Yeung.  In fact, various documents dated back in the 1980s were disclosed. Whilst nothing prevented his opponent from seeking discovery prior to the trial, Yeung was under the primary burden to prove by cogent evidence his claim in the present case.  On this basis, it is understandable why suspicion is cast on whether Yeung might have been selective in disclosing such kind of documents concerning the Flats.

102.  That aside, amongst the documents actually disclosed, there are telephone bills concerning the land line at the Flats which showed that telephone calls to the Mainland and Australia were made in early December 1996.  Yeung admitted in court that he made those calls.  Considering all the evidence, Yeung’s case that he entered and commenced occupation of the Flats no earlier than 1997 is not as clear as he might want to portray.

103.  Further, there was also the handover of the management of the Christ Disciple’s Church to Yeung prior to Liu’s passing.  First, the evidence tells that Liu took a trip to the US and Canada to visit Koo SM and her another brother (Koo Chun Ming) respectively for a total of 3 weeks in April 1996.  During their conversation on such occasion, according to Koo SM, Liu explained that she managed to take the time off and felt relieved to have Yeung (already) helping to take care of and to serve the church in Hong Kong at the time.

104.  Then, a formal handover was carried out in the open with a ceremony held on 22 September 1996, which was less than two months before Liu’s passing.  The occasion was depicted in a photograph taken on that day when Yeung was amongst those present. The backdrop set up for the occasion literally suggested that it was a handover ceremony.  As such, the handover must entail someone taking over.  At the back of the photograph, Liu apparently wrote the caption that Yeung presented her with the bouquet and card in congratulation of her retirement.  That had to be retirement from managing the church at the Flats.  Importantly, Liu wrote that Yeung did so as pastor and representing the church.  Confronted with the above evidence, Yeung somehow went so far as denying that Liu trusted him or entrusted him with the care of the church.  This is just incredible.

105.  As mentioned, Yeung also denies that Liu handed to him the keys to the Flats before her death.  He had to effectively break open to gain access to the Flats with the help of locksmith.  On behalf of Sun, it is pointed out that Yeung was inconsistent in his evidence as to which or how many locks of the Flats that he allegedly caused to break and change when he sought to move in.   That in my view does not compare to Yeung’s doubtful case of the timing of his moving into the Flats discussed above.  On balance, the circumstances, I find, were such that Yeung was permitted by Liu to access to the Flats in connection with his role as the pastor of the church at the Flats by 1995-1996 or in any event prior to her death.

106.  Yeung’s evidence in court that the keys were entrusted to Koo CM or other members of the church is incredible.  Whilst the evidence of Cheung and Koo SM in respect of the passing of the keys by Liu to Yeung may cause one to wonder if it was indeed a matter of her personal knowledge or mere inference, the same could not be said about the evidence of Yung.  Yung was firm that during his meeting with Yeung in 2015, it was Yeung who told him that Liu passed the keys to the Flats to Yeung.  Considering his evidence as a basically independent witness as well as his performance in the witness box, I find Yung to be a truthful and reliable witness.  Wherever there is inconsistency between his evidence and that of Yeung, I would not hesitate to prefer the former.

107.  Putting aside whether Yeung entered into possession of the Flats only after Liu’s passing and whether he had to break in, the suggestion that Yeung did so with the intention of possessing the Flat as his own right after Liu’s death without any reference to the interaction and dealings between him and Liu before Liu’s death is quite inconceivable.  The role that Yeung as a pastor and that he played during the last stage of Liu’s life weaved the background for Liu to entrust the running of Christ Disciple’s Church to Yeung.  Liu set her mind in handing over the care of the church and thus the Flats, and for such purpose, a ceremony was held, less than two months prior to her death.  Upon her death, Yeung assumed the role as the pastor in conducting the funeral service and the funeral parlour.  As counsel for Sun puts it, logic suggests that Liu would see that Yeung could have access to the Flats whether or not the keys were in fact also handed to him.  In any event, the fact that Yeung eventually might have had to break open to gain access to the Flats would have been a matter of logistics only.  That, if true, would not serve to contradict the consent of Liu to his access to the Flats given prior to her death.  There is no suggestion that any church member or Liu’s family, including Koo CM or Koo SM, questioned how Yeung came to have access to and use of the Flats.  As mentioned above, Koo SM actually visited the Flats and met Yeung face to face in 2014.

Use of the Flats since Yeung’s occupation

108.  Whether or not it was by way of the keys handed to him by Liu before her death or his breaking in after her death, Yeung’s access to and use of the Flats after Liu’s death, as found above, could not be separated from the blessing of Liu before her death.  Where the entry and commencement of occupation of the Flats was pursuant to consent, the requisite intention of adverse possession hardly existed.  It will be for Yeung to prove by cogent evidence if such requisite intention came about after that point of time and, more importantly, that such requisite intention was manifested to the outside world.

109.  The evidence shows far from that.  Against the background of the church at the Flats and the involvement of Liu who knew that, it would be most unlikely that she would have somehow kept all that from Yeung when the latter joined the church as a pastor and was eventually entrusted with the care of the church there.  In other words, it was more likely than not that Yeung was aware of the essence of the Purposes for which the Flats have been and should be used.

110.  Yeung’s own evidence shows that he has indeed used the Flats for church service, which was in line with the Purposes, more apparently than any intention of his to deal with the Flats in his own name and on his own behalf to the exclusion of the world.  According to Yeung, churchgoers of the church at the Flats attended Sunday service and they could spread the faith of Christianity and the gospel to their family and friends.  This was not dissimilar to the state of affairs since the 1960s.  As examples, Wu,his witness, came to know Yeung as pastor of Christ Disciple’s Church in late 1997.  According to him,Yeung often mentioned that he had to prepare for Sunday service at the church.  Wu also witnessed the presence of churchgoers on Sundays.  According to Lo, Yeung’s other witness, he has attended the church at the Flats since 2000, when religious gatherings would be held a few days a week.  According to Yeung, youngsters and ethnic minorities such as Filipinos in Hong Kong would also attend the church at the Flats to receive the preaching of the gospel.  Other individuals who were homeless, jobless or mentally impaired did so too. Interest class was held in the name of the church at the Flats to raise funds to subsidise the running of the church. Donations and dedications were received by the church at the Flats for the promotion of Christianity or other good causes, and to maintain the church at the Flats so that such causes pursued by the church could be sustained.  The dedication box, pulpit, musical stand and stage at the Flats could be seen in the photographs produced.

111.  The above evidence contradicts Yeung’s case that Sunday service has become seldom since 2000.  In court, he had to acknowledge that.  The attempt of Yeung to portray the Flats as having evolved from the days of Kong or Liu and away from the declared dedication of the space for church or the Purposes was too self-conscious to be believable.

112.  In the course of the evidence, the issue of the control of Yeung over the Flats and the admission and stay of people in the Flats was brought up.  Instances of expulsion of members of the congregation were cited.  It was however made clear by the evidence of Lo that those were incidents when Yeung as the pastor had to maintain the orderly conduct of church service and the wellbeing of the rest of the congregation present.  Control in those terms were not inconsistent with the use of the Flats as church in line with the Purposes. Nor was that unequivocal manifestation of the requisite intention of adverse possession.

113.  Yeung resides in the Flats.  Yet this is no different from the time when the church was first conceived and founded by Kong at the 1^st Flat and then the Flats in the 1960s.  Wu in his oral testimony confirmed the area within the Flats that Yeung, and since his marriage in 2015 his wife as well, resided in.  Whilst Yeung was bound to have the use and control over basically every corner of the Flats, the bulk of the space of the Flats was clearly kept flexible that could be conveniently converted into an open space for religious gatherings and services of the church.  The foldable partition doors, the library with shelves of Bibles and religious books and stock of chairs are concrete examples of how the Flats were prepared to be used. Yeung even converted a bathroom into toilet cubicles for the convenience of the congregation.  Outside the Flats, the external appearance of the Flats, the signboard, the religious painting and even the cross erected on the rooftop of the Building were depicted in the photographs and could be seen by the witnesses from both sides.

114.  The visits that Yung and Koo SM have paid to the Flats in 2004 and 2014 respectively also provided them with the opportunities to personally observe the features and use of the Flats by Yeung mentioned above.  What they observed both outside and inside the Flats during those visits clearly left them with no impression that Yeung might be occupying the Flats with any intention of asserting rights over them to the exclusion of the owner and the world.  Butler v Dickson (above) refers.

115.  Yeung was conscious to emphasize that he changed the name of the church at the Flats to Christ Great Commission Church in late 1997, and has since run that as his own church.  There is no suggestion or evidence that the previous change of name of the church at the Flats from Church of Hong Kong to Christ Disciple’s Church by Liu manifested such significance.  As mentioned, the letter from Koo CM and the consequential declaration of Sun in 1986 demonstrate the contrary.  One may actually say the same about the change of the name of the church by Yeung, in view of the contemporaneous evidence discussed below.

116.  When one considers the contemporaneous documentary evidence adduced by Yeung, the differentiation of his church and occupation of the Flats from that of his predecessor, namely Liu and Christ Disciple’s Church, was apparently immaterial even in Yeung’s own eyes.  Various demand notes and bills concerning the Flats were still addressed to Christ Disciple’s Church or Pastor Yeung even after late 1997 and some even in as late as 2009.  Yeung accepted that the government rent and utilities accounts remained in the name of Christ Disciple’s Church.  In some cases, Yeung himself would ask the suppliers to address their invoices to Christ Disciple’s Church instead of the church he has renamed.  Insofar as the Building is concerned, the Flats were invariably known and referred to in documents as simply the church.  This remained to be case ever since Yeung has been involved in the owners’ committee of the Building in late 2003 and notwithstanding the alleged change of the name of the church.  For the purpose of his English tuition classes held at the Flats in 2002, Yeung placed newspaper advertisement in the name of Christ Disciple’s Church, and thus representing to the outside world that the running of those classes had to do with the church of that name. Yeung would also enter into contract with equipment and service providers in the name of Christ Disciple’s Church, and was seen to have used the chop of that church apparently similar to the one used by Koo CM for the church in documents back in the 1980s mentioned above.

117.  Yeung did try to explain the above state of affairs.  Reasons given in court included the lack of funds to top up the deposit upon change of the utilities account details.  That is hard to accept, if one compares the perceived top up amount with the expenses evidenced by the receipts.  That is particularly incredible, when it was Yeung’s own evidence that he actually engaged and paid lawyers to handle the formalities of registering Christ Great Commission Church purportedly in place of the Christ Disciple’s Church allegedly in 1997.  It sounds strange that he would care to spend to do that but only to resolve to use the name of his predecessor’s church because of the alleged concern about the need to top up the deposit for changing the names of the utility accounts.  Yeung also explained that it was pursuant to accountant’s advice that he continued to use the name of Christ Disciple’s Church in order to avoid audit fees.  All these assertions were made only in the witness box and cannot be verified by any relevant documentary evidence.  His explanation defies reasonable understanding.

118.  The objective fact was that the church at the Flats after Liu’s death was still run under the name of Christ Disciple’s Church for a long time.  Yeung is simply unable to convince this court that he himself has ever attached any significance to the change of the name of church, the exact timing of which is anyway unclear.  Most significantly, whichever church name was adopted, the Flats continued to be used in line with the Purposes. Any change of name of the church in the circumstances was nominal.

119.  To the extent that the Flats have in fact continued to be used over the past decades, including by Yeung since mid-1990s, primarily in line with the Purposes expressly declared by the predecessor of Liu and Yeung, ie Kong, the occupation of the Flats by Yeung, including his own incidental residence therein, per se did not have the effect of detracting materially from such purpose.  In these circumstances, it would require much compelling evidence before Yeung could establish the requisite unequivocal intention to occupy the Flats in his own name and on his own behalf to the exclusion of the world without reference to the Purposes.  If such requisite intention is said to come about only at a certain point after the commencement of his occupation of the Flats, it would equally be his burden to establish when that happened by compelling evidence of manifestation of such change.

120.  All evidence considered, including those discussed above, Yeung’s evidence in this respect is simply not reliable.  Nor is his alleged intention of adverse possession unequivocal or compelling.  This court is not impressed that throughout all these years since Yeung’s occupation of the Flats, the outside world ever perceived that he did so exclusively for his own benefit without reference to the church there and his capacity as the pastor there.  There were all the circumstances that cause one to believe that any such intention came about only because of his present claim triggered by the re-development initiative not long before 2015.

121.  Upon rejection by this court of his case for his failure to substantiate by unequivocal and compelling evidence of the requisite exclusive possession and intention, in view of the continuous occupation and use of the Flats essentially in line with the existence of a charitable trust in respect of the Flats since the 1960s, Yeung’s claim fails.

Legal existence of the charitable trust

122.  To recapitulate, there was a clear and unchallenged intention on the part of Kong to promote Christianity.  Such clear intention was unequivocally documented in the Book and the 1964 Writings (and the 1965 Variations) as well as manifested by the terms of the Will, properly construed in the circumstances.  It was also manifested in Kong’s speeches on various occasions of congregations.  The Flats have been used for the Purposes since the 1960s.  Part of the Flats has always been used for residence, firstly of Kong and her family and then her co-workers.  Their accommodation incidental to the work under the trust was not inconsistent with the Purposes: see Cheung Man Yu (above) at §60.  The use of the Flats ever since until and even after Yeung came into occupation has largely remained in line with the Purposes, notwithstanding the incidental use of part as his residence.  The elements of public benefit, I find, existed.  The conditions of a charitable trust set out in CheungMan Yu (above), in my judgment, are satisfied for the factual existence of such trust in respect of the Flats in the circumstances of this case.

123.  If Sun manages to establish the charitable trust as a matter of legal existence, Sun’s counterclaim would also succeed.

124.  Insofar as the legal structure and formalities are concerned, it is argued on behalf of Yeung that the alleged charitable trust in respect of the Flats, or specifically the 2^nd Flat, fails for lack of writing.  As mentioned, counsel for Yeung acknowledges that it should be section 5(1)(b), instead of section 5(1)(a), that should be relevant.  Section 5(1)(b) provides that a declaration of trust respecting land or any interest therein shall be manifested and proved in writing signed by the person who is able to declare such trust or by his will.  It is argued on behalf of Sun that first, the reliance is misplaced, and second, the formalities under section 5(1)(b) were in any event satisfied.

125.  As mentioned, the CPO came into effect on 1 November 1984, which was nearly two decades after the alleged creation of the trust in the 1960s in the present case.  Section 7(b) provides that nothing in section 5 shall affect any interest validly created before the commencement of the section.  It is fairly argued on behalf of Sun that at the material time, it was the Application of English Law Ordinance enacted on 6 January 1966 applying certain provisions of the Statute of Frauds 1677 to Hong Kong (for the period since 6 January 1966) and/or section 5 of the Supreme Court Ordinance applying certain provisions of the Statute of Frauds 1677 to Hong Kong (for the period before 6 January 1966).  Yeung should have made clear by pleading the basis for the proper consideration of the applicability of either the Statute of Frauds or section 5 of the CPO before Sun is expected to answer: see Sinoearn International Limited v Hyundai CCECC Joint Venture (2013) 16 HKCFAR 632 at §§30-31; 33-34; see Kwok Chin Wing v 21 Holdings Limited (2013) 16 HKCFAR 663 at §21.  He has not done so.

126.  That said, counsel for Sun came prepared to argue on the basis that declaration of a charitable trust of land must be manifested and proved in writing by the settlor.  He nevertheless argues that such formality requirements should not apply to defeat a charitable trust: see Cheung Man Yu and Ma Wah Yan(above).  Equity does not allow a statute to be deployed as an instrument of fraud: see Snell’s Equity (34^th ed) at §24-023.  Where a person takes real estate by instrument inter vivos in pursuance of a parol arrangement that the property should be held by him upon trust, he is not allowed to use the statute as a means of avoiding the performance of the trust: see Halsbury’s Law of HongKong(Vol 26) at §§165.118 to 165.119.  This is a fortiori the case for a charitable trust which is not for private gains.  The same applies in the circumstances of the declaration of trust in respect of the 1^st Flat for charity as well as the consistent understanding of the same by the co-workers and the parties eventually named in the Will throughout the past decades.  As this court finds above, the attempt of Yeung to truncate that by reference to his alleged adverse possession since mid-1990s is rejected as being equivocal and self-serving as a matter of fact.

127.  Even assuming that it applies, what section 5(1)(b) of the CPO requires is that the trust must be “manifested and proved” in writing signed by the person able to declare such trust.  The requirement of written manifestation and proof may be satisfied by subsequent acknowledgement, declaration or memorandum by the trustee which can operate retrospectively from the time of its operation: see Lewin on Trusts(20^th ed.),§§3-013 to 3-014.

128.  As discussed, the Book and the 1964 Writings (and the 1965 Variations) by Kong afford as written proof of the unequivocal manifestation of Kong’s intention regarding the 1^st Flat. The 1964 Writings were her own writings.  The pleaded case of Sun that they were signed by Kong were not specifically traversed.  The absence of that issue also explained the complete lack of consideration and direction by the court of the need of handwriting proof.  In the circumstances, the attempt only in the course of cross examination to question the handwritings appearing in the 1964 Writings or the 1965 Variations was not legitimate or fair.

129.  The handwritten remarks at the back of the 1964 Writings by Kong after the Will, as found above, served as consequence of the making of the Will instead of revocation of the trust or its underlying intention.  Also as discussed, the Will, properly read in the context and circumstances known to Kong and all persons concerned at the time, could only reinforce the maintenance of the intention underlying the trust she has already unequivocally declared in respect of the 1^st Flat.  By then, the 2^nd Flat became joined with the 1^st Flat, and treated alike by Kong when making the Will.

130.  As discussed, the understanding of the executrix, ie Sun, and those who were named as apparent beneficiaries under the Will have been consistent with that of Kong in the past decades.  All of them in the similar roles of co-workers prior to the making of the Will became effectively custodians of the Flats for the Purposes.  As the executrix, Sun had the necessary power including the power of conveyance of immovable property without an order of the Court: see section 54(2) of the Probate and Administration Ordinance (Cap. 10).  There was never vesting of the beneficial interest in the Flats in the beneficiaries under the Will.  Sun, as this court accepts, was laboring under the mistake for years that the administration of the estate of Kong had ceased to be her business. That however is beside the point.  The point is that at the request of Koo CM of Christ Disciple’s Church in 1986, Sun in her capacity as the executrix of the Will made a declaration before the Notary Public confirming that up to (at least) her emigration in July 1975, the Flats were used by the church for non-profit and non-commercial purposes pursuant to the wish of late Kong.  Such declaration signed by Sun as executrix or trustee of the estate of Kong qualified as further written manifestation of the intention of the estate of Kong in respect of the Flats for the purpose of section 5(1)(b).

131.  Counsel for Sun also advanced alternative arguments.

132.  First, it is argued that according to section 5(2) of the CPO, the requirement as to the creation or disposition of equitable interest in land under section 5(1)(a) (which Yeung somehow pleaded) and the requirement of manifestation and proof in writing of declaration of trust respecting land under section 5(1)(b) (which Yeung did not plead but relies on during the trial) do not affect the creation or operation of resulting, implied or constructive trusts.  Insofar as it is necessary, the declaration of trust in respect of the Flats by Kong as acknowledged by Sun and Cheung, being the executrix and beneficiary named under the Will, as well as the circumstances surrounding and subsequent to the declaration, arguably afford the factual basis for the existence of an implied trust.

133.  Second, it is argued that section 7(d) of the CPO provides that nothing in section 5 shall affect the operation of law relating to part performance.  Insofar as part performance on the part of Kong and all parties concerned at the time and in the following decades until the present dispute is concerned, the circumstances of the present case discussed above arguably suffice in substantiation of the trust in respect of the Flats for the Purposes.

134.  All matters considered, including those discussed above, this court is satisfied that the Flats were and still are subject to a charitable trust for the advancement of Christianity and shall be used for and incidental to the purposes of the trust.  It is only right to recognise the legal existence of the trust in respect of the Flats.

Conclusion

135.  I am compelled by the circumstances to find the existence of a charitable trust in respect of the Flats as a matter of both fact and law.  In my judgment, Yeung fails to discharge his burden of proof of the alleged adverse possession of the Flats with the requisite intention that would have extinguished the title of Kong’s estate in the circumstances of the case.

136.  Sun is therefore entitled to vacant possession of the Flats. Whilst Yeung did not actually suggest or produce evidence to that effect, this court does not rule out that the injunctive relief and order for vacant possession may affect innocent third parties such as churchgoers and people enrolled with any tuition or interest classes held at the Flats as a result of Yeung’s occupation.  As mentioned, Sun holds nothing against such use of the Flats if in line with the purposes of the charitable trust.  This court is therefore prepared to factor the necessary flexibility into the order to be made.

Declaration of charitable trust

137.  It follows from above that this court should be prepared to consider granting the declaration of charitable trust in respect of the Flats.  However, question arises as to whether this court should do so when the apparently interested parties are not all before this court.  Of the 7 apparent beneficiaries of the bequest of the Flats under the Will, only Sun is a party but in her capacity as the executrix and Cheung but in her capacity as a witness.  None of the other 5 named beneficiaries, or whoever that still survive as of today, has been joined as apparently interested parties for the purpose of the declaratory relief.  Their position regarding the declaratory relief is unknown.  Nor has counsel for the estate of Kong or the Department of Justice made submission in this respect.

138.  In these circumstances, this court considers that it is inappropriate to grant the declaration of charitable trust in respect of the Flats in the present action.  That said, nothing seems to prevent the executrix of the estate of Kong from initiating a separate action for the declaration of the charitable trust in respect of the Flats on the basis of the above findings after trial in the present action and by joining all the surviving interested parties.

Order

139.  The claim is dismissed.

140.  Judgment is entered on the counterclaim in that there will be an order for vacant possession and injunctions sought under the counterclaim (as summarized in §42(2)-(4) above) save that the time for the 1^st and the 2^nd defendants (by way of counterclaim)to comply with the order shall be 30 days from the date hereof or such longer time or subject to such licence as the estate of Kong may agree to grant to the 1^st or the 2^nd defendants (by way of counterclaim)in writing.

141.  I also order on nisi basis that Yeung shall pay Sun’s costs of this action, including any costs reserved, to be taxed, if not agreed.  Engagement of two counsel is certified.  In the absence of application in 14 days to vary, this nisi costs order shall become absolute without further order.

HCA 413/2015

[2019] HKCFI 424

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 413 OF 2015

_______________

_______________

(By Original Action)

_______________

(By Counterclaim)

_______________

DECISION

_______________

1.  The plaintiff (“Yeung”) commenced the original action on the ground of adverse possession of the properties which are registered in the name of Kong Tuen (or Duen) Yee (“Kong”). Kong passed away in 1966 leaving a will. The defendant (“Sun”) is the executrix of the estate of Kong. Sun resists the claim, and counterclaims for possession of the properties against Yeung and any other occupier of the properties unknown (the 2^nd defendants by counterclaim). On the basis that the properties were and are subject to an alleged charitable trust set up by Kong, Sun also joined the Secretary for Justice as a party (the 3^rd defendant by counterclaim).

2.  Yeung applies for security for costs against Sun.  By the time of the hearing of the application, the case has reached the stage where the case has been directed to be set down for trial.

The dispute

3.  Kong was a movie actress, well known then by the name of梅綺. The properties in question consist of two flats situated on the 5^thFloor of Nos 5 and 7 Soares Avenue, Kowloon, which are adjacent to each other.  Kong was the registered owner of the properties.

4.  Kong passed away on 17 August 1966, leaving a will.  Probate in respect of her estate was granted on 31 August 1968 to Sun as the executor named in her will.  Sun was and is ordinarily resident in the United States of America.  She is over 80 years old.

5.  Yeung’s case is that since 1996, he has been occupying and residing at the properties to the exclusion of the world at large.  On the ground of adverse possession of the properties in excess of 12 years, Yeung through his solicitors wrote to Sun on 12 February 2015, stating that Kong’s estate has been barred from recovering the properties from him.  He requested for the transfer of the properties to him or legal action would be instituted.

6.  On the following day, Yeung’s solicitors sent a further letter repeating the same assertion and request.  They added that the title of Kong’s estate in the properties has been extinguished pursuant to section 17 of the Limitation Ordinance, Cap 347 (“LO”).  Later in the same month, Yeung commenced the present action.

7.  By pleading, Sun denies the claim of adverse possession or the loss of right to recover the properties on the following grounds:

   (1)   The properties were and still are subject to a charitable trust created by Kong in the 1960s, whereby the properties were devoted to use for the purpose of the advancement of Christianity, including as a church for congregation, preaching the Gospel, studying the Bible and scriptures as well as relieving and healing the sick and poor spiritually.

   (2)   Yeung, as well as the co-workers, officers and members of his church, had knowledge about the purpose and use of the properties as aforesaid, and did in fact use the properties as such at least up to the end of 2014.  Until then, Yeung did not have the requisite animus possidendi nor factual exclusive possessionof the properties.  Further, possession of the properties by Yeunguntil then was not adverse, successive or continuous as alleged or at all.

   (3)   It was only when Yeung asserted rights over the properties on the ground of adverse possession and commenced this action effectively in breach of trust in early 2015 when the right of action by Sun to exclude Yeung and to recover the properties from Yeung accrued.

   (4)   Further or alternatively, Sun contends that the beneficiaries of the charitable trust are the members of the public at large who are collectively entitled to use and to occupy the properties for the purpose of the trust from time to time.  By virtue of sections 10 and 22 of the LO, her right of action is not time-barred.

8.  In her pleadings, Sun set out the following background giving rise to ground (1) above[1]:

   (1)   By a Chinese writing dated 30 July 1964 signed by Kong to take effect at 0:15 am, Kong declared herself to be trustee of the first of the two flats in question, which was used for preaching the Gospel and for the members of her church by the name of the Church of Hong Kong.  That would last until it was God’s will that the flat should be sold, but the proceeds of sale must not be used for any other purpose except for purchasing a better venue for similar purpose.  Kong purchased the second flat to accommodate the expansion of the church by the end of 1965.  The two flats were joined as one for her ministry.  These were well known amongst her co-workers, church members and congregation then.  The same was also disseminated through her book “生命證道集” distributed by “基督靈恩佈道團” amongst Christians in Hong Kong.

   (2)   By her will, Kong appointed Sun and another as the executors, and bequeathed the properties to them together with five others absolutely as joint tenants.  Before and after making the will,she admonished Sun and the other joint tenants that they must look after the properties as trustees and use the same for the purpose mentioned above.

   (3)   In the premises, Sun, as the executor of Kong’s estate, has at all times held the properties as trustee for the purpose of the charitable trust established by Kong.

9.  As to ground (2) above, Sun’s pleaded case is as follows[2]:

   (1)   Sun left Hong Kong to settle in the USA in 1975.  Ruth Cheung (“Ruth”), daughter of Kong and leader of the church then, was entrusted with the keeping of the keys to the properties.  In 1979, Ruth, together with some members of the church, began to congregate elsewhere, while three of the joint tenants of the properties and about 20 members of the church continued to congregate at the properties. Madam Liu Lai Chun (“Liu”) was one of them.

   (2)   Eventually, Liu became the remainder, who was entrusted with the keys to the properties and became in charge of the congregation there.  She later renamed the congregation as the Christ Disciple’s Church (基督信徒教會).  The joint tenants of the properties, the co-workers, officers and members of the church then all knew that the properties should continue to be used for the purpose established by Kong as before.

   (3)   In 1994, Yeung joined the congregation at the properties as pastor of the church.  With the permission of Liu, Yeung also started to reside and serve the church at the properties.  Prior to her death, Liu entrusted to Yeung with the running of the church and the use of the properties for such purpose as before.  Yeung therefore had knowledge of the purpose of the trust and the use of the properties for such purpose.  It was in those circumstances Liu passed the keys to the properties over to Yeung.  Since then until at least 2014, Yeung had indeed used the properties in the name of the church pursuant to that arrangement.  Yeung is said to have admitted that on a couple of occasions in recent years.

10.  As to the accrual of her right to recover the properties from Yeung mentioned in ground (3) above, Sun referred to the events occurring in early 2015 that precipitated the commencement of this action[3]:

   (1)   Essentially, at about the end of 2014 and early 2015, it became known that a potential purchaser was interested in purchasing the properties as part of a redevelopment scheme.  An offer of about HK$10 million for each of the properties was made.

   (2)   Yeung was motivated by personal financial gain to try to sell the properties as his, and lodged his claim of possessory title to the properties and this action toward such end.

   (3)   For the above reasons, Yeung has acted in breach of the charitable trust, and he and all those occupiers of the properties in his connection that are unknown to Sun have disqualified themselves as beneficiaries under the trust.  On this basis, any licence or permission for them to access to or to occupy or use the properties became liable to be revoked, and was so revoked upon the service of Sun’s counterclaim.

   (4)   It was on this basis when Yeung and the occupiers in his connection are said to have become trespassers of the properties, so that Sun may exercise her right to recover possession from them.  Such right of action is thus not time- barred.

11.  Sun claims for possession and injunction against Yeung and any occupier of the properties in his connection unknown to her.  Her claim for damages for trespass has been abandoned.

12.  In reply, Yeung pleaded how he came to possess the properties and manage the church service there.  He apparently accepted that the management of the church at the properties was indeed handed over to him in September 1996, though, according to him, without mention of the properties[4].

Security for costs

13.  By letter to Sun’s solicitors dated 29 October 2015, Yeung through his solicitors requested Sun to pay security for costs, including counsel fees, up to the close of pleadings in the estimated sum of HK$468,000.  The request was made on the ground that Sun, who is counterclaiming in this action, is ordinarily resident overseas.  Sun through her solicitors refused such request in writing on 5 November 2015.

14.  This action proceeded, and the question of security of costs was let lie until more than two years later when Yeung made his request in writing to Sun in February 2018.  This time, the amount requested was HK$4 million, including counsel fees, for costs up to trial.  The parties ensued in correspondence within that month before Yeung took out this application on 28 February 2018.

15.  The skeleton bill filed in support of this application adjusted the amount of security sought to HK$3,661,100.

16.  The principles governing the application for security for costs were rehearsed in the parties’ correspondence and referred to in submissions.  Without setting out exhaustively what counsel submitted in detail, I think the principles in operation in the present case may be summarized in the following few paragraphs.

17.  Order 23, rule 1(1)(a) of the Rules of the High Court provides that where on the application of a defendant to an action, it appears to the court that the plaintiff is ordinarily resident out of the jurisdiction, then if, having regard to all the circumstances of the case, the court thinks it just to do so, it may order the plaintiff to give such security for the defendant’s costs of the action as it thinks fit.  Sub-rule(3) provides that for the purpose of this rule, references to a plaintiff and a defendant shall be construed as those to a plaintiff and a defendant in the case of a counterclaim as well.

18.  In the present case, Sun, being the plaintiff by way of counterclaim and ordinarily resident out of Hong Kong, is prima facie caught by the above provision.  Nevertheless, an order for her to pay security for costs of her counterclaim may be made only if, having regard to all the circumstances of the case, it is just to do so.  This is the unfettered discretion of the court.

19.  The mere making of a counterclaim does not put the defendant in the position of the plaintiff for the purpose of Order 23, rule 1.  The question is whether the counterclaim is a cross-action or merely operates as a defence.

20.  Where a defendant set up a counterclaim which arose out of the same transaction as the claim, and was in substance, though not technically,in the nature of a defence to the action, the court may refuse to order the defendant to give security for costs of the counterclaim, if this is just and fair as between the parties in the circumstances of the particular case: see Neck v Taylor [1893] 1 QB 560; Elegant Jump Limited v Tribune Bridge Limited & Anor, HCA 14037/1999 (10 November 2000) at pp 10 – 11; Lai Jianping& Anor v ABN Amro Bank NV [2013] 3 HKC 571 at 576.

21.  In this respect, both parties also referred to the summary of the principles explained in Ai Zhong v Metrofond Ltd [2010] 1 HKLRD 213 (at §22).  The court should consider the following matters[5]:

   (1)   What is fair and just in all the circumstances.

   (2)   Whether ordering security for costs would effectively prevent the defendant from pursuing a claim which is based on all of thesame matters that would be canvassed when defending the claim.

   (3)   Whether the counterclaim is a cross-action or merely a defence. In particular, (i) whether the claim by the plaintiff and the cross- claim by the defendant raise essentially the same issues and are going to be fully litigated anyway so far as one can tell, and (ii) whether there is any marked discrepancy in size between the amount claimed in the action and the cross-action.

   (4)   Whether the costs incurred by the defendant for the purposes of the defence is effectively better regarded as costs for prosecuting the counterclaim.

   (5)   Whether the order would effectively require the defendant to give security for costs only for defending himself from the plaintiff’s claim.

   (6)   Where both the plaintiff and the defendant can be viewed as attackers, the treatment of both parties in security for costs should be the same.

22.  Sun also complains about delay on the part of Yeung in makingthe present application.  As to this, delay per se does not suffice in denyingan application for security for costs, and the court has to consider the prejudice of the delay to the plaintiff: see Peconic Industrial Development Ltd v Chio Ho Cheong HCA 16255/1999 (26 October 2005).  Late application, in particular when the trial is imminent, per se constitutes real prejudice to a plaintiff, since the plaintiff is being put in a position of having little or no choice but to put up the security in order not to abandon and waste all the work done and costs incurred in preparing the trial: see Peconic Industrial Development Ltd (above); Waddington Ltd v Chan Chun Hoo Thomas & OrsHCA 3291/2003 (7 May 2013) (at §33); Haifa International Finance Co Ltdv Concord Strategic Investments Ltd HCA 4442/2003 (7 March 2014) (at §§3 – 5).

23.  Merit of the case is not irrelevant, though detailed investigation into the merit for the present purpose will not be justified unless the party resisting the application for security for costs manages to demonstrate that it has a high degree of probability of success: see China Smart Properties Ltd v Manson Holdings Ltd HCA 13913/1997 (12 March 2002) (at §7).

24.  Each case turns on its own circumstances.

The arguments

25.  Yeung’s contention is that the counterclaim of Sun exceeds thescope of her defence and constitutes an independent action against him.  He argued that in defence of his claim, Sun could have focused on challenging his alleged factual possession and animus possidendi.  Mr Chan, appearing for Yeung, submitted that Sun could have simply put his client to strict proof.  Instead Sun brought in the assertions in respect of the charitable trust, and for such purpose the Secretary for Justice as a party, for the purpose of her counterclaim.  In other words, Yeung is saying that the contentions of Sun in respect of the charitable trust are extraneous to the defence and made solely for the purpose of the counterclaim.

26.  I do not agree with Yeung.

27.  Central to Sun’s denial of Yeung’s exclusive factual possession,or more significantly his alleged unequivocal animus possidendi of possession,of the properties adverse to their registered owner and the world at large is the precisely the existence of the alleged charitable trust created by Kong.  Yeung is said to have no requisite intent to possess the properties adverse to owner of the properties and the world at large because of his knowledge about the charitable trust and his possession and management of the properties with the permission of Liu pursuant to the purpose of the trust for the benefit of the congregation there at all material times.

28.  The contentions of Sun as to fact are such that until at least the end of 2014, Yeung had been using the properties apparently in line with the purpose of the charitable trust known to him.  It was also in the circumstances that Sun took the stance that there was until then no basis for her to question Yeung’s use of the properties.

29.  Yeung made the point that a charitable trustee holding the title to a trust property is not immune from the operation of adverse possession. In other words, it is argued that even assuming the charitable trust in respect of the properties alleged by Sun existed, Yeung could still obtain possessory title on the ground of adverse possession that serves to extinguish the charitable trustee’s legal title in the trust property.

30.  It is not apparent at this stage if this contention, as a matter of principle, will be disputed.  It is also unclear whether sections 10 and 22 of the LO, as pleaded (§7(4) above), has any relevance to that, as not much was said about this ground of defence during submissions.  However, what is apparent is that the contentions in respect of the charitable trust started by Kong and the continued use of the properties, including that by Yeung with knowledge, pursuant to the trust are relied on as the factual basis for disputing the allegations that Yeung possessed the properties as hisown with the animus possidendi to the exclusion of their owner and the world at large—the pre-requisites to the establishment of the fact of adverse possession in the first place.

31.  Whether the trust existed, and exists, of course is a question offact to be determined upon consideration of all the circumstances of the case:see Ma Wah Yan & Anor v Dharma Realm Buddhist Association, Inc & Ors HCA 1190–1193/2007 (3 August 2016); and on appeal, CACV 179/2016 (2 March 2017).

32.  In her defence, Sun specifically refers to and relies on the events between the end of 2014 and early 2015, which changed the above situation and Sun’s position towards Yeung[6]. These events are pleaded in the amended counterclaim.  Again, these are factual contentions that founded Sun’s perception of the intention of Yeung, or its change, in respect of his occupation of the properties.  It was upon these events that Yeung is said to have manifested his intention of no longer occupying the properties in line with the charitable trust.  Viewed as conduct in breach of trust, Yeung and any persons who may be occupying the properties in his connection, but unknown to Sun, are said to have become trespassers of the properties.

33.  The alleged charitable trust is the foundation and the abovementioned factual contentions form the substance of Sun’s denial of the alleged exclusive possession and the requisite intent on the part of Yeung as to adverse possession of the properties during the relevant period.  This distinguishes the present case from any given case where the registered owner of the property in question may defend his or her interest in the property by no more than putting the claimant to proof.  Sun has a positive case to run in defence, and there is no legitimate basis for expecting her to confine herself to putting Yeung to proof of his case.  Putting aside their merits, I do not see how these factual contentions could be said to be extraneous to her defence.

34.  Is Sun’s counterclaim a cross-action in any way separate and independent from the substance of the defence?  I think not.

35.  What the counterclaim introduces is the legal basis for Sun’s claim, namely, that it is an implied condition of the charitable trust that persons within the class of beneficiaries under the trust, or those granted thelicence or permission to enter upon the properties, shall not do or attempt todo anything that may, or may threaten to, deny the trust or to defeat, frustrate or obstruct the purpose of the trust[7]. As far as the factual contentions in the counterclaim are concerned, Sun repeats her defence.  Particulars of the events concerning Yeung and persons in his connection since the end of 2014, which are expressly referred to and relied on in defence, are set out[8]. By reason of the events since the end of 2014, Yeung and persons in his connection are said to have acted in breach of the charitable trust[9], and have disqualified themselves as beneficiaries under the trust as well as their licence or permission to enter upon and to use the properties[10].

36.  Even without the counterclaim, the trial of the substance of the defence would have had to canvass the same factual contentions.  Alternatively, the factual contentions in the counterclaim are clearly intertwined with those made in defence, so that Sun does not stand out as the attacker as opposed to a defendant by relying on those contentions.

37.  The relief sought by Sun in the counterclaim is substantially consequential and corollary to his contentions in defence against Yeung’s claim.  The joining of any person in occupation of the properties in Yeung’s connection but unknown to Sun collectively as a defendant in the counterclaim does not change that.  Nor does the joining of the Secretary for Justice, being the guardian of the beneficiaries of charity, as a defendant in the counterclaim rightly or wrongly[11].

38.  As to delay, Sun highlighted the following circumstances:

   (1)   Yeung first requested for security for costs in October 2015. Then it was one for a sum of HK$468,000 for his costs up to the close of pleadings. Mr Chan now submitted that this was a grossly premature request.  In any event, Sun then rejected the request with full reasons set out.  Since then, Yeung has not raised the topic of security for costs again.  The parties proceeded, and incurred costs.  By December 2017, the parties have already filed their respective witness statements.

   (2)   The 2^nd case management conference was scheduled to be heard on 17 January 2018. It had to be adjourned because of the grant of legal aid to Yeung.

   (3)   On 14 February 2018, which was more than two years since the topic of security for costs was last dropped, Yeung through his solicitors demanded security in the sum of HK$4 million for costs up to the trial.

   (4)   On 31 July 2018, the master directed that this case be set down for trial.

39.  It is incumbent for Yeung to explain why he chose to make such demand and application in the above manner: see Senior Honor Ltd v Lee Ki Kuk & Ors HCA 4043/2001 (14 November 2003).  According to Yeung, he had insufficient financial resources to also pursue the demand for security for costs until he was granted legal aid.

40.  I am not at all impressed by the explanation.  It was not that Yeung was unrepresented until the grant of legal aid.Yeung proceeded with the various steps in this action with the assistance of solicitors and counsel all along[12].  Yeung’s skeleton bill of costs suggested that he has afforded substantial costs without legal aid.

41.  If it was ever a conscious decision of Yeung to let further steps be taken and costs be incurred (by both sides) instead of avoiding that by anearly application for security for costs, he took the risk that the consequence of his decision may work against him.

42.  It is of course the burden of Sun to establish the consequential prejudice as a result of the delay.  Having said that, I need not go further on this, in view of the above discussion in respect of the interaction between the defence and the counterclaim. Nor am I prepared to dive into the merit of the case in detail for the present purpose.  Yeung’s denial of Sun’s contentions is noted.  Suffice it to say that the factual contentions of Sun are not without supporting evidence that will be led in the trial[13].

43.  There is much to say about the quantum.

44.  In October 2015, Yeung projected his costs up to the close of pleadings to be HK$468,000.  He now projected his costs up to the trial to be about HK$3.7 million.  Yeung seems to suggest that 70% of his costs were and would be incurred distinctly for the purpose of defending the counterclaim.  In other words, his projected full costs of this action up to the trial would be over HK$5 million.

45.  Considering Yeung’s skeleton bill and Sun’s list of objections, and for a 10‑day trial (as opposed to 14 days projected by Yeung), I agree the sum of HK$2.7 million proposed by Sun would be reasonable costs.  Further, any security should be confined to the costs of defending the counterclaim, but not answering the defence.  As nearly the same extent of the factual contentions for the purpose of the counterclaim is canvassed by the defence, which Yeung would have to deal with in his claim in any event,the net costs attributable to his defence to the counterclaim should be relatively minimal.  There is basis for Sun to argue that this should not exceed 5% of the total costs of Yeung.  This also adds to the reluctance of the court to exercise discretion to order security for costs of such scale.

Conclusion and order

46.  Considering all the circumstances, I do not consider it just to grant the present application.

47.  Yeung’s application is dismissed with costs to Sun, to be taxed,if not agreed.  For the avoidance of doubt, I give certificate for counsel. Yeung’s own costs shall be taxed in accordance with legal aid regulations. The costs order is nisi, and shall become absolute without further order, in the absence of application in 14 days to vary.

HCA 413/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 413 OF 2015

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R E A S O N S    F O R    D E C I S I O N

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1.  This hearing concerned amendments to the defence and counterclaim.  They were not opposed subject to an outstanding issue, ie whether or not the pleas and affidavit evidence concerning privileged discussions should be struck out.  After hearing arguments, I declined to strike out.  Here are my reasons.

The facts

2.  The deceased acquired 2 properties both on 5/F of No 5 and No 7 Soares Avenue (collectively “the Flats”).

3.  The plaintiff by original action (“Pastor Yeung”) is a pastor of a congregation which has been operating at the Flats. The defendant by original action (“Madam Sun”) is the executrix of the deceased.

4.  The plaintiff claims to have been in adverse possession of the Flats and seeks declarations that he has dispossessed the deceased’s estate.

5.  This is denied by Madam Sun.  Her case is that the deceased had formed a charitable trust for the advancement of Christianity (“the Trust”), designating one or both of the Flats for that purpose.  By will, she has appointed 6 persons including Madam Sun to be joint tenants of the Flats.  They were to continue the Trust.

6.  Pastor Yeung joined the congregation since about 1994.  According to Madam Sun, he has been permitted to live, preach and serve at the church at the Flats, at least up to 2014.  On the other hand, Pastor Yeung claims to have engaged a locksmith to gain entry and changed the lock. In 1997, he formed his own preaching circle.  In 2000, he started to operate a farm in Mainland China. Since then he has seldom held any Sunday service at the Flats but has retained exclusive possession of them.

7.  At about the end of 2014 or early 2015, a potential developer wanted to purchase the Flats at $10 million each.  On 26 February 2015, Pastor Yeung commenced this action seeking declarations in relation to his possessory title.

8.  The subject matter of the strike out concerned 3 meetings on the following dates, attended by Pastor Yeung on the one part, and Samuel Yung, Alfred Lam and Shally Wong of the Christian Philadelphia Church representing Madam Sun on the other.  According to these representatives:

(a) 9 April 2015: Pastor Yeung said that one Madam Liu gave him the keys to the Flats.  After Madam Liu’s death, Pastor Yeung continued to serve the old members of the church at the Flats but also brought in new members.  There were exchanges over the present action.  Samuel Yung told Pastor Yeung that the Flats were dedicated by the deceased for the preaching of the gospel.  Pastor Yeung responded by saying that he would consult the old and new members of the congregation.

(b) 16 April 2015: Pastor Yeung said that he had borrowed money for the litigation and incurred more than $100,000.  He said that the old and new members of his congregation responded quite strongly to the decision of Madam Sun and Ruth Cheung to recover possession of the Flats.

(c) 26 June 2015: Pastor Yeung said that he represented 15-20 of the new members of the congregation and a few of the old members.  He said he could not agree to the withdrawal of the proceedings as he had to take into consideration the interest of his congregation and they did not agree to such withdrawal.

9.  The draft amended defence and counterclaim pleaded that  these were admissions of (i) the existence of the Trust; and (ii) Pastor Yeung continuing to serve the old members of the church in accordance with the Trust. These pleas would contradict Pastor Yeung’s self-professed claim to occupy the Flats as a squatter.  

10.  Ms Tsau, counsel for Pastor Yeung, submitted that the 3 meetings took place after commencement of the action and contained without prejudice discussions. They ought to be struck out from the pleadings and should not be relied on in various affidavits filed on behalf of Madam Sun.  It would not cause prejudice to Madam Sun because she could still rely on other evidence of admission.  This would include Pastor Yeung’s alleged admissions in 2004 and 2014 to Samuel Yung and Koo Suet Ming, respectively, that he was serving a congregation at the Flats; and the evidence of Koo Suet Ming that Madam Liu handed the keys to Pastor Yeung.

Legal principles on striking out

11.  There was no dispute on principles.  It is only in plain and obvious cases that the court should exercise its summary powers to strike out any pleading under Order 18, rule 19.  There should be no trial on affidavits.  Disputed facts are to be taken in favour of the party whose pleadings are sought to be struck out: Hong Kong Civil Procedure 2016, Vol 1, 18/19/4.

Legal principles on without prejudice communication

12.  In Re Jinro (HK) International Ltd [2002] 4 HKC 90 (at §§13-18). Kwan J (as she then was) laid down the following principles:

(1) For a claim of “without prejudice” privilege to succeed, the party claiming it must show that the communication was made:

(a) in a bona fide attempt to settle a dispute between the parties; and,

(b) with the intention that, if negotiations failed, the communication could not be disclosed without the consent of the parties making the communication.

(2) In establishing that there was a bona fide attempt to settle a dispute, the party seeking to assert privilege must show that, at the time of his communication:

(a) a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated; and,

(b) the communication was made in an attempt to further negotiations to settle that dispute.

(3) The mere fact that a communication concerns a dispute between the parties is not sufficient to confer privilege.

(4) The communication need not be expressed to be “without prejudice”, if it is clear from the surrounding circumstances that the parties were genuinely seeking to compromise their dispute.

(5) But there is an exception to the “without prejudice” privilege.  This exception applies where the exclusion of the evidence would act as a cloak for perjury or other “unambiguous impropriety”.

Application of the legal principles

13.  Ms Tsau pointed out that holding 3 meetings was strong evidence of negotiations rather than a one-way demand for the full return of the Flats.  In any event, the meetings would not be disqualified from being without prejudice discussions when one party asked for all.

14.  I noted that there was nothing in the 3 meetings pointing to a “compromise”. Each party was recounting some history.  Madam Sun’s representatives asked Pastor Yeung to consider withdrawing the claim.  The discussion was based on biblical principles among people who professed to be religious people.  No proposal or counter-proposal on settlement was put forward by either side. There was no negotiation of terms.  No solicitors were involved though both parties were represented.  Had the contents of the meeting been in writing, they would have been more in the nature of demand letters, put in a biblical tone.

15.  Pastor Yeung had not filed any affidavit to even assert the privilege. Only his solicitor did.

16.  Mr Suen, counsel for Madam Sun, also submits that even if the contents of the 3 meetings were without prejudice, the court should invoke the exception in Re Jinro.  This is because where the occupier has made statements as to what his intention was and such statements were against his interest, the courts would usually accord to them considerable weight: Wong Tak Yue v Kung Kwok Wai & anor (No 2) (1997-98) 1 HKCFAR 55 (at 69B-C).  Such evidence would, Mr Suen submitted, show that Pastor Yeung had lied in the reply and defence and counterclaim.

17.  I am unable to agree.  In true without prejudice discussions, parties are encouraged to be frank and forthcoming.  They may make admissions against their own interests.  It would be opening a dangerous floodgate if the court were to lightly permit without prejudice discussions to be adduced as evidence.  I certainly would not want to decide such an important principle in an interlocutory matter like this. 

18.  I rest my decision on paragraphs 14 and 15 alone.  In my view, the contents of the 3 meetings were far from being in the nature of privileged discussions. They should not be struck out.  It may be true that Madam Sun could rely on other pieces of evidence to show admissions made by Pastor Yeung against his interest.  However, that was not a valid reason for striking out what were material facts.

19.  If I am wrong, Pastor Yeung fell short of showing a plain and obvious case for striking out.  The discussions were not stated to be on without prejudice basis. The mere fact that a communication concerned the dispute was not sufficient to confer privilege.  The circumstances of the 3 meetings, whether Pastor Yeung had perjured himself or had unambiguous impropriety so as to justify disclosure of what was without prejudice discussions ought to be explored at the trial.

20.  I therefore dismiss the application to strike out.

Orders

21.  As regards Pastor Yeung’s striking out summons dated 6 April 2016, most of the reliefs sought have become otiose because of the concessions of Madam Sun.  Those concessions together with the voluntary further and better particulars have been reflected in the draft amended defence and counterclaim. I therefore order that:

(1) Under paragraph 4 of the summons, the voluntary further and better particulars be struck out;  

(2) Subject to the foregoing paragraph, the application for striking out is dismissed.

22.  As regards the Madam Sun’s summons dated 23 August 2016:

(3) Madam Sun do have leave to withdraw 2 earlier summonses filed on 30 March 2016;

(4) Madam Sun do have leave to amend the defence and counterclaim as per the draft attached to the summons dated 23 August 2016, as amended by document “A” handed up at the hearing, within 7 days.

(5) Madam Sun do have leave to substitute and join parties as per the draft amended defence and counterclaim in paragraph (4) above;

(6) Pastor Yeung do have leave to make consequential amendments to the reply and defence and counterclaim within 14 days from the day of handing down of this decision.

23.  On costs, Madam Sun has made many changes to her pleadings, as evidenced by her issuing 3 summonses and withdrawing 2 of them.  The last summons was issued only 2 weeks before the hearing, causing wastage of much costs. Save on the issue of privileged discussions, Pastor Yeung was successful in his summons.  On a nisi basis, I order that:

(7) Costs of and occasioned by the amendments to the defence and counterclaim be to Pastor Yeung, to be taxed if not agreed after trial;

(8) 80% of the costs of all 4 summonses shall be to Pastor Yeung, summarily assessed and allowed at $120,000.

(9) Madam Sun’s own costs be borne out of the estate on trustee basis.

24.  I thank counsel for their assistance.