In re LAM SHIU CHIEN suing as trustees/managers of the KWONG SIN TONG AND OTHERS

1993, No. MP 2797

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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H E A D N O T E

[All proceedings for declaratory relief, including proceedings commenced by originating summons, must be commenced inter partes. An intending vendor cannot ask the court in ex parte proceedings to resolve a doubt as to his own title]

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J U D G M E N T

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1. This is an application, by Sik Tak Sheung, Sik Miu Wai, Ho Sim and Lam Shiu Chien, commenced by an originating summons issued ex parte on 26th July 1993. The applicants (as I shall call them) claim to have issued the proceedings as "Trustees or Managers of the Kwong Sin Tong". Since the proceedings are ex parte, no-one at all has been made a respondent to the proceedings.

2. The reason assigned by the applicants for the issue of these proceedings in that form is that they are anxious to enter into a contract to sell certain property on Hong Kong Island, but that an intending purchaser has raised objections to their title, claiming that it is doubtful whether the applicants have power to sell the property to the intending purchaser. The desire of the applicants to have the matter cleared up is, of course, entirely understandable. However, the issue of an originating summons in ex parte form is not the way to do it. The point is not a point of mere procedure.

3. An intending vendor with a doubt as to his own title cannot apply to the court ex parte in order to get that doubt resolved. There is in Hong Kong a tendency to treat the court as a place to go to for what is, in effect, title indemnity insurance. But an intending vendor cannot approach the court, in proceedings to which he has made no one else a party, in order to get the court to declare that he has a good title to his property. This does happen, the idea apparently being that armed with such a declaration the intending vendor will then be able to sell his property without further difficulty. I have pointed out before that this is entirely misconceived; and this case shows that it is necessary for me to restate once again some of the basic principles which govern the commencement of civil proceedings in order to explain why it is so.

4. The role of the court in civil proceedings is to resolve differences between opposing parties. If there is no present dispute between parties as to their legal rights, there is nothing for the court to resolve. Except in very special cases the court will not resolve academic, hypothetical or future questions.

5. A person claiming a declaration as to title must be able to secure, in proceedings inter partes, someone who has a legal interest to oppose the declaration sought. So, it is one thing for a vendor under an agreement for sale and purchase to institute proceedings against the purchaser (or vice versa) in order to have the court declare who is right and who is wrong on the issue which divides them. It is quite another for one who is merely a prospective vendor to institute proceedings against a prospective purchaser or, worse still, against no one at all, in order to have the court deliver some sort of advisory opinion (it cannot be a declaratory judgment in any real sense, since there is no-one to be bound by it) that there is nothing wrong with the intending vendor's title.

6. Proceedings in which this is attempted fundamentally misconceive the function of the court in civil proceedings. The misconception which underlies such attempts may be traced, perhaps, to equally fundamental misconceptions as to the purpose and use of the originating summons procedure. All civil proceedings must be begun by some sort of originating process. The most important originating process is the writ of summons. A writ action, however, can prove cumbersome and expensive, and the Rules of the Supreme Court therefore make provision in certain cases for an alternative originating process, the originating summons, in the hope that, in the sort of case in which use of the originating summons is prescribed or permitted, and the facts of the case are not in dispute, the originating summons procedure will prove simpler, quicker and less costly than a writ action. But proceedings commenced by originating summons are just as much an action as proceedings commenced by writ, and like a writ action can be instituted only by a plaintiff who is seeking some relief against the party whom the plaintiff has named and constituted as the defendant. You cannot institute proceedings by originating summons which you could not have commenced by writ.

7. The Rules of the Supreme Court do provide, not only for originating summonses inter partes, such as I have already described, but also for originating summonses ex parte. There are certain very special cases for which the use of the originating summons ex parte is prescribed by the Rules of the Supreme Court, e.g. to obtain an order for payment out of moneys in court. In such cases, there is no need to make anybody a defendant to the originating summons. But the proper use of the ex parte originating summons is confined to very special cases. Certainly, the originating summons ex parte is not available for general use as a way of getting the court's opinion on a question of title, in proceedings to which only a prospective vendor and nobody else is a party. It is not the function of the court to settle the doubts of owners of property about the state of their own title in the absence of some other party with a legal interest in the matter. It may be that some of these misconceptions arise from the presence, as Form No.11 in Appendix A to the Rules of the Supreme Court (without any indication of its purpose), of the form of ex parte originating summons which is so often abused in the way I have mentioned.

8. However, provided the proceedings are properly constituted between a plaintiff and a defendant who are genuinely and presently interested to have the court resolve the question over which they differ, the court has a power to grant relief by way of declaration, that is to say a declaration which makes it clear which of them is right. It has that power in actions commenced by writ and also in actions commenced by originating summons inter parties. As I have said, It will not exercise the power in order to decide academic, hypothetical or future questions; and the power will not be exercised by consent, but only on proper proof of the circumstances claimed to justify the making of the declaration. It is a power which is given to the court for the purpose, and only for the purpose, of resolving a question between parties with competing legal interests who are in present disagreement about their legal rights. In the absence of these features, the court has no jurisdiction to grant any declaratory relief and will not do so.

9. This need cause no problem for a vendor who perceives that there may be a difficulty as to his title. He may and should provide in the contract offered to the purchaser that, at the vendor's expense, the purchaser is to be at liberty to apply a summary way to the court under s.12 of the Conveyancing and Property Ordinance, Cap.219 for a decision of the point in issue. (Further provision should be made, for the purchaser to be entitled, if the decision goes against the vendor, to rescind with all the usual consequences, such as repayment of the deposit with interest; payment by the vendor of the purchaser's costs and expenses of investigating the title; and so on.)

10. In such a case, or for that matter in a case in which the contract contains no such provision but a dispute as to the title arises between vendor and purchaser after the contract is made, the proceedings, if commenced inter partes, will have been properly constituted.

11. In the present case, I suggested to counsel, Audrey Eu, Q.C., who appeared for the applicants, that there may be a way out of the difficulty with which the court is faced because no one has been made respondent to the applicants' proceedings. I made the suggestion that, since there were four of them, one of them might be struck out as a plaintiff and added as a defendant. In that case, the proceedings would be properly constituted; and although the newly added defendant might not be willing to raise any objection to the relief sought, nevertheless, providing the question was a real one, he would be a person against whom the declaration sought could be made. Sensibly (if I may say so) she accepted that suggestion. In order to save time, I suggested that I could give leave here and now for one of the applicants (so called) to be struck out and added as a defendant, the remaining three applicants thereafter continuing as plaintiffs in the action. Miss Eu agreed to this as well and offered Sik Miu Wai, the 2nd applicant, for the purpose. On instructions, she was able to ask for that relief and to assure me that Sik Miu Wai would have no objection to being struck out as a plaintiff and added as a defendant in this way. I, therefore, give leave for that to be done. Further, I propose to dispense with service of the amended proceedings on the newly added defendant and to treat his interest as adequately represented before me by the solicitors instructed by the continuing applicants, now the plaintiffs. (There is no objection in proceedings of this sort for the same set of solicitors to be on both sides of the record. This is not hostile litigation.)

12. I now turn to the substantive point in the case.

13. The plaintiffs, together with the newly added defendant, are the trustees and managers of the Kwong Sin Tong. They have vested in them the legal estate in the properties mentioned in the originating summons, that is to say (1) Unit B, 3/F, 1 South Lane, Hong Kong (2) Rear Portion, 3/F, 157 Pei Ho Street, Kowloon and (3) Flat C, 3/F, Tai Cheong House, 2-4 Tai Ping Shan Street, Hong Kong ("the properties"). They are anxious to market the properties. A prospective purchaser of one of the properties (the South Lane property) has expressed himself unwilling to enter into any contract with the trustees and managers unless a doubt as to their title is first resolved.

14. The originating summons asks that it may be determined whether the properties are held on a valid charitable trust for the objects and purposes of the Kwong Sin Tong. I cannot in these proceedings make any such declaration, but it is clear that the properties were purchased with moneys held upon trust. The trustees and managers acknowledge that the trusts on which they hold the property are charitable trusts, and the Attorney General has expressed himself to be of the same opinion.

15. In these circumstances, it seems to me entirely safe to proceed on the footing that the properties are held upon charitable trusts, although it may be that the trustees and managers would be well advised to declare specifically the trusts upon which they accept they hold the properties.

16. Quite apart from the fact that the legal estate in the properties is vested in the trustees and managers, the assignment by which they acquired the properties and in particular the South Lane property, contain an express power of sale:

"UPON TRUST to sell the same or any part thereof at any time during the residue of the said term of 999 years and to stand possessed of the net proceeds of sale arising under the trust aforesaid and also the net rents and profits of the said premises until sale UPON TRUST for the said Institution absolutely ....."

17. Since there is conferred on the trustees and managers this express power of sale, I have no hesitation in holding that they are entitled, in favour of a purchaser, to exercise it and (although the point does not presently arise for determination) I have no doubt that they are in a position to give a good receipt to the purchaser for the purchase money. In these circumstances, I would think no purchaser would consider it necessary to raise any objection to the title offered by the trustees and managers on the ground that they do not have power to sell the properties.