TONG CUN MING AND OTHERS v. CHEUNG SUN LING SANNY, the Administratrix of the Estate of KWAN YAU HANG, deceased AND OTHERS

HCMP 143/2011

[2022] HKCFI 3002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 143 OF 2011

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HCMP 1013/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1013 OF 2011

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HCMP 2477/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2477 OF 2011

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(Heard together)

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DECISION

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1.  These cases have a chequered history. There was serious dispute between the members of a Taoist institution known as “Kam Lan Koon” (金蘭觀)  about the administration of the affairs of the Koon. As a result, these litigations were commenced by some members seeking to challenge certain resolutions purportedly made by the Koon and for a better administration order in respect of the management of the affairs of the Koon.

2.  The factual background of these cases has been set out in my Judgment on Preliminary Issues dated 2 September 2015 (“the 2015 Judgment”)  and I do not want to repeat the same here.

3.  For the purpose of this Decision, I will adopt the same abbreviations that I used in the 2015 Judgment.

4.  After the handing down of the 2015 Judgment, the Traditionalists’ Camp lodged an appeal against such Judgment.  The Traditionalists’ Camp also took out summonses in each action to strike out the claims of the Reformists’ Camp on the grounds that, inter alia: (i)  the Plaintiffs in these actions (being members of the Reformists’ Camp)  do not have locus standi to bring the claims against the Koon and the members of the Traditionalists’ Camps; and (ii)  the claims in these actions should be struck out because they are not properly constituted as derivative actions.  In the appeal, I understand that the Traditionalists’ Camp also sought to challenge the 2015 Judgment on the ground of lack of locus standi.

5.  The striking out summonses came before me for argument on 4 and 5 July 2017.  By that time, the Court of Appeal had dismissed the appeal against the 2015 Judgment with reasons to be handed down at a later date.  In the Reasons for Judgment handed down on 28 July 2017, the Court of Appeal had made it clear that they would not entertain the challenge of the Traditionalists’ Camp on the lack of locus, and they would leave the matter to be considered by me in the striking out applications.

6.  In view of the dismissal of the appeal, the parties agreed that the claims in the Resolutions Action (HCMP 1013/2011)  and the Membership Action (HCMP 2477/2011)  became academic.  The Koon would then convene meetings and conduct the affairs giving effect to the rulings in the 2015 Judgment in respect of the Resolution Action and the Membership Action.  The parties also agreed for the Plaintiffs to discontinue the claims in these two actions with the question of costs to be argued later.

7.  The Reformists’ Camp also sought to discontinue the Better Administration Action (HCMP 143/2011).  But in view of the outstanding striking out summons on the lack of locus in commencing better administration proceedings, the parties require this court to determine the merits of the striking out application which may have an implication in the arguments on costs later.

8.  The question that I have to decide is whether the Plaintiffs in the Better Administration Action has the locus to bring the claim against the 5 Chairpersons, the Koon and the Secretary for Justice (“SJ”)  claiming for, inter alia: (i)  a declaration that the Koon was a charity in the legal sense and there be a better administration order for the operation of the Koon; (ii)  an order that the 5 Chairpersons be removed as councillors of the Koon by reason of their misconduct and mismanagement of the Koon; and (iii)  an order that that there be proper election of the councillors of the Koon in accordance with the provisions in the Memorandum and Articles of the Koon.

9.  The SJ did not appear in the hearing.  However, the court was of the view that the SJ should make submissions on the question as to whether there are any other persons apart from the SJ who have the locus to ask the court to invoke the parens patriae jurisdiction over charities.  The SJ made such written submissions on 30 August 2017 and the other parties made their written submissions in response on 25 and 27 September and 18 October 2017.

10.  Sometime in 2018, the court came to know that the Court of Appeal had handed down an important judgment in 釋照月v Secretary for Justice & Ors[1] (“the 釋照月 case”)  which dealt with the locus of an individual to bring an action for a better administration order against a charitable institution.  I saw the need to invite the parties to make further submissions in light of this new authority. The parties therefore made further written submissions pursuant to the directions of the court.  Unfortunately, after the filing of these submissions, the file was left unattended for a considerable period of time and the outstanding decision only came to the attention of the court recently.  That explains the delay in the handing down of this Decision.

The 釋照月 case

11.  In my judgment, the 釋照月 case provides the answer to the striking out application in the Better Administration Action.

12.  In the 釋照月 case, the applicant was a Buddhist monk.  He claimed that there was mismanagement in respect of the affairs of Man Wa Tong (“MWT”)  which held and managed a Buddhist temple called Chuk Lam Sim Yuen (“the Temple”).  He commenced proceedings by way of originating summons against the SJ, the Secretary for Home Affairs (“SHA”), and the manageresses of MWT claiming for the following relief:

(i)  intervention by the SJ in its capacity as parens patriae (protector of charities);

(ii)  authorisation in writing by the SHA, pursuant to the Chinese Temples Ordinance (Cap 153)  (“CTO”), of an appropriate person to enter the Temple and investigate if there was evidence of contravention of the CTO; and

(iii)  restructuring of the Tong into a company limited by guarantee under the Companies Ordinance (Cap 622)  to which assets under the Trust should be transferred on a cy-prés principles and to which professional persons, holders of public office and respected members of society should be appointed as directors.

13.  The managers of MWT issued a summons to strike out the originating summons on the ground that the applicant did not have the locus to commence the proceedings.  Lisa Wong J ruled in favour of MWT and the applicant appealed to the Court of Appeal.

14.  According to the Court of Appeal, the crucial issue in the striking out application was whether the applicant could be regarded as “a person otherwise interested in the trust” within the meaning of s 57A(a)(iii)  of the Trustee Ordinance (Cap 29).  S 57A is a provision about proceedings relating to the administration of charitable trusts.

15.  In considering the appeal, the Court of Appeal examined the statutory scheme for the supervision of charities in England under the Charities Act 1960 and observed that there was inadequacy in term of public supervision and accountability for charities in Hong Kong.  In England, there were a body of Charity Commissioners responsible for supervising the proper administration of charities.  In contrast, Hong Kong does not even have any charities legislation, and it has to rely on the SJ as parens patriae to police abuses in charities.  Due to lack of funds or lack of interests, the SJ tends to take out enforcement actions infrequently and arbitrarily, and the legitimately interested parties may be put in difficult positions when they seek to prevent abuses in charities.  The Court of Appeal also expressed dissatisfaction that no follow up actions had been taken after the publication of the Report of the Law Reform Commission on Charities in December 2013.

16.  Against such background, the Court of Appeal was of the view that the expression “persons otherwise interested in the trust” in s 57A(a)(iii)  should not be construed too narrowly.  The Court approved the dicta of Nicholls LJ in Re Hampton Fuel Allotment Charity[2] and held that if a person has an interest in securing the due administration of a charitable trust greater than those of ordinary members of the public, he or she may be qualified as a “person interested”.

17.  The Court of Appeal held that the judge below had not fully considered the applicant’s interest in securing the due administration of the Temple and so it remitted the case back to the court below for reconsideration.  Cheung JA even went further and observed that, by reason of the various factors identified in §52 of the Judgment, the applicant appeared to be someone who had an interest materially greater than or different from those possessed by ordinary members of the public which might qualify him to bring the proceedings.

18.  The Traditionalists’ Camp argue that the dicta of the Court of Appeal in the 釋照月 case are only confined to the meaning of “persons interested” in s 57A(a)(iii)  of the Trustee Ordinance, and they are not applicable in the case of the Koon which is operated in the form of a limited company though charitable in nature.  In the case of the latter, managerial decision is a matter for the board of the incorporated company and the court should be reluctant to override rules applicable to corporations generally.

19.  Further, Mr Chan, SC, counsel for the Traditionalists’ Camp and the Koon, argues that the only legislations in Hong Kong dealing with the management of charities are the Trustee Ordinance and Order 120 of the RHC.  As there is no primary legislation governing who has the right to invoke the court’s inherent jurisdiction to intervene in the management of charitable corporations (as opposed to charitable trusts), only the SJ or person with the consent of the SJ has the right to ask the court to invoke such jurisdiction in the case of charitable corporations.

20.  According to Mr Chan, the role of the SJ is to act as a protector of public interest.  Relying on cases such as Gouriet v Union of Post Office Workers[3] and Attorney General ex rel. Mcwhirter v Independent Broadcasting Authority[4], Mr Chan submits that the proper plaintiff for enforcing a public right should be the Attorney General or now the SJ.  A private individual who did not suffer damage beyond that suffered by the public at large may seek to enforce a public right only through relator proceedings.  The individual can relate the action to the SJ who may then bring an action to assert the said public right.  Such restriction serves as a safeguard against multiplicity of proceedings and interference by members of the public nosing into the affairs of others.  Further, it prevents charities from flittering away money subject to charitable trusts in pursuing litigation in relation to internal disputes.

21.  Mr Chan therefore submits that in order for private individuals to seek better administration of a charity, they can only do so by one of the following options:

(i)  through the SJ by relator proceedings;

(ii)  in accordance with any legislation that provides them with a right to do so (such as s 57A of the Trustee Ordinance); or

(iii)  establishing a cause of action against the charity of an infringement of their private rights, or establishing any damages suffered due to the charity’s infringement of public right beyond those suffered by the public generally.

22.  As the Plaintiffs’ claim in the Better Administration Action does not fall within any of these categories, the claim should be struck out.

23.  I disagree.  Charitable organisations in Hong Kong are usually operated in one of the following forms:

(i)  a company which may be limited by shares or by guarantee, or an overseas company;

(ii)  an unincorporated association which may or may not be required to be registered under the Societies Ordinance (Cap 151);

(iii)  a trust; or

(iv)  a statutory body established under a specific Hong Kong Ordinance.

24.  The parens patriae jurisdiction over charities is an inherent jurisdiction of the court with the object of preventing abuses in the operation of charities.  Such jurisdiction covers all charities including charitable corporation which does not depend on their assets being held subject to charitable trusts.[5]

25.  In fact, according to History of the Law of Charities 1532-1827 Jones[6], it is clear that the courts in England have exercised inherent jurisdiction over charities since the earliest of time.  From 1532 onwards, bills or petitions were used to enforce charitable uses, and such petitions included applications to correct maladministration of charitable funds.  The petitions were often made by private individuals with some interests in the success of their petitions, and it was not just the government (or the Crown in England)  which possessed the right to invoke the parens patriae jurisdiction of the court over charities.[7] However, the law in England was subsequently amended with the introduction of Charity Commissioners.  With such public guardians, there may be some justification to restrict the right of ordinary members of the public to invoke the parens patriae jurisdiction of the court.

26.  As observed by the Court of Appeal in the 釋照月 case, the position in Hong Kong is very different.  There is no specific legislation governing supervision of charities and the SJ is ill-equipped to carry the sole responsibility of monitoring the operation of charities.  As the object of the parens patriae jurisdiction is to prevent abuses in charities, there is no reason to disallow interested persons to invoke such jurisdiction of the court in appropriate cases.

27.  In fact, there seemed to be the position of the common law before the introduction of charities legislations in England.  In Ware v Cumberlege[8], Sir John Romilly MR observed that it was impossible to lay down hard and fast rule as to who might be the proper plaintiff to bring a claim relating to charities.  However, it was contemplated in that case persons other than the Attorney General (SJ in Hong Kong)  might bring claims, as the judge discussed the necessity of joining the Attorney General as a party to the litigation depending on the nature of the claims.[9]

28.  Further, it would be absurd to suggest that there would be two thresholds for invoking the parens patriae jurisdiction of the court over charities: “person interested” would have the right to ask the court to intervene in the case of charitable trust within the meaning of s 57A, while the SJ (or person who has the consent of the SJ)  is the only person who can ask the court to invoke the jurisdiction if the charities are operated in forms other than a trust.  Taking into account the observations made by the Court of Appeal in the 釋照月 case about the inadequacy of the law in Hong Kong in term of public supervision and accountability for charities and the unsuitability of the SJ as the sole guardian for proper operation of charities, I am of the view that the dicta of the Court of Appeal is also applicable in considering the locus of an applicant who seeks to invoke the parens patriae jurisdiction of the court over other forms of charities.

29.  In fact, the distinction between a charitable trust and other forms of charity may be blurred at times.  The public may be making donations to a charitable corporation.  Though the charity is operated by way of a corporation, it may also involve a charitable trust as the donations may be made for a particular cause.  In the present case, the parties agreed at the outset of the proceedings that the Koon is not a charitable trust.  However, it does not make a lot of sense that the exercise of the court’s parens patriae jurisdiction depends on these fine distinctions.

30.  As demonstrated by the facts in the 釋照月 case and the present case, the SJ is usually very reluctant to take part in the proceedings involving disputes relating to alleged mismanagement of charities. The SJ is not in a position to decide which sides is telling the truth, and so the SJ is reluctant to intervene unless there is clear evidence supporting the allegations of the complainants.  Under such circumstances, restricting the right of interested persons to invoke the court’s parens patriae jurisdiction would defeat the very object of the jurisdiction.

31.  As such kind of proceedings involve the parens patriae jurisdiction over charities and the Plaintiffs are not trying to protect their own private rights, the company law concept of proper derivative action is not applicable in considering the locus of the Plaintiffs.  After all, they are asking the court to grant a better administration order which is a relief unique to charities proceedings and not a relief for mismanagement under the company law.

32.  Further, Lam VP (as then was)  observed in Secretary for Justice v Joseph Lo Kin Ching[10] that the court’s inherent jurisdiction may in appropriate cases override the rules applicable to corporations.  Nevertheless, whether the court should invoke such power would have to be considered on “a case by case basis”.  Hence, it is beyond doubt that the court’s inherent jurisdiction extends to charitable corporations.

33.  There is a faint suggestion by Mr Chan that Order 120 of the RHC provides the only means by which applications concerning charities may be made to the court.  I do not propose to deal with such argument in great details here.  It suffices for me to say that such procedural rules do not by themselves confer any new jurisdiction or power on the court, but merely provide a summary and less expensive procedure for the exercise of the court’ existing jurisdiction over charities.  Such procedural rules do not and could not have been intended to curtail or restrict the scope of the court’s inherent jurisdiction in general covering, inter alia, charitable corporations.  Nor do such procedural rules have the effect of restricting the persons who may (as a matter of general law)  otherwise be entitled to invoke the court’s inherent jurisdiction over charities.

34.  For the above reasons, I agree with Mr Chain and Ms Tong, counsel for the Reformists’ Camp and the SJ, that as a matter of common sense, and taking into account the nature of the court’s inherent jurisdiction, the historical development with regard to the exercise of such jurisdiction and the dicta of the Court of Appeal in the the 釋照月 case, a person who has an interest in securing the due administration of a charity greater than those of ordinary members of the public should be allowed to make an application to the court to invoke its parens patriae jurisdiction over charities.

Whether the Plaintiffs have the right to commence the Better Administration Action?

35.  The court should therefore apply the aforesaid principles in considering whether the Plaintiffs have the locus to commence the Better Administration Action.

36.  Following the rulings made in the 2015 Judgment (in particular about the legal effect of the Termination Resolution), it is now common ground that:

(i)  all the Plaintiffs in the Better Administration are and were at all material time members of the Koon;

(ii)  the 2^nd to 4^th Plaintiffs were at all material time members of the Executive Committee of the Koon and were involved in the decision making process or the execution of the decision of the Board of Councillors for the management of the business and affairs of the Koon; and

(iii)  the Plaintiffs (in particular the 1^st Plaintiff)  had made significant donations to the Koon.

37.  Unlike the applicant in the 釋照月 case whose relationship with the Temple was more remote and his locus to bring the proceedings has yet been determined, it is clear in the present case that the Plaintiffs are not just ordinary members of the public nosing into the affairs of the Koon.  As they are and were members of the Koon, they certainly have a legitimate interest in ensuring that the Koon, which the parties agree is a charity, is administrated properly giving effect to the object of the Koon and not to break any law in its operation.  Further, some of the Plaintiffs were members of the Executive Committee and they were clearly persons involved in the administration of the Koon.  It is simply absurd to suggest that they do not have the locus to bring better administration proceedings the object of which is to secure the due administration of the Koon as a charity.

38.  Furthermore, some of the Plaintiffs have made substantial donations to the Koon to promote its cause.  The Plaintiffs’ position is certainly very different from those who just make modest donations to a charity on a flag day.  In my judgment, they have an undeniable interest to ensure that the Koon is properly administered.

39.  For the above reasons, I find that the Plaintiffs do have the locus to commence the Better Administration Action claiming for the relief stated in the pleading.  Whether the court should grant such relief is a different question which has to be properly investigated at the trial.  I therefore dismiss the striking out application.  I also make a costs order nisi that the 2^nd to the 6^th Defendants do pay the costs of the Plaintiffs and the 7^th Defendant in respect of the striking out application, which shall be made absolute 21 days after the date of the handing down of this Decision.