JEREMY GAR YIN IP AND OTHERS v. SECRETARY FOR JUSTICE OF THE HKSAR

HCMP 1156/2021

[2021] HKCFI 3215

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS No 1156 OF 2021

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D E C I S I O N

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Background

1.  This is an application for a scheme to vary the terms of the Peace Memorial Scholarships (“the Charity”).

2.  The first 3 Applicants (“Trustees”) are the current trustees of the Charity.

3.  The 4^th Applicant (“ESF”) operating under the name of King George V School (“KGV”) is a statutory body constituted under and governed by the English Schools Foundation Ordinance, Cap 1117 of the Laws of Hong Kong.  At all material times, ESF was and is acknowledged by the Hong Kong Inland Revenue Department as a charity for the purposes of section 88 of the Inland Revenue Ordinance, Cap 112 of the Laws of Hong Kong.

4.  The 5^th Applicant is a trust corporation incorporated in the United Kingdom, which acts as custodian-trustee of the Charity (“Custodian-Trustee”).

5.  KGV was first established in Hong Kong in 1894 using English as the medium of learning.

6.  The Charity was first constituted on 11 February 1921 by an anonymous donor in the Shanghai International Settlement.  The original trust deed was lost, probably during the Second World War when the premises of KGV were occupied.  A true copy of the Memorial of the principal terms of the Charity and an extract of a memorandum subscribed to the Trust Deed dated 18 April 1923 are produced as evidence.

7.  The fund of the Charity was subsequently enlarged by a supplemental donation on 18 April 1923.  The terms of the Charity at that time provided for the endowment of 2 annual scholarships for further study in each of: (1) electrical engineering or synthetic chemistry; and (2) practical farming and/or horticulture.  The prizemen had to meet, amongst others, the requirements of being a male, British and of pure white descent at the time of their candidature in China or Hong Kong; and whose parents or one of them shall have resided in China or Hong Kong for a period of at least 3 years.

8.  On 28 July 1947, by order of the Chancery Division of the High Court of England and Wales, the Custodian-Trustee, which was then known as Hong Kong and Shanghai Bank (Trustee) Limited appointed as one of the custodian-trustee of the Charity.

9.  On 12 October 1957, the Supreme Court of Hong Kong made a Vesting Order, vesting the assets of the Charity in the Custodian-Trustee, and for a scheme of variation mandating the partial liberalization of the terms of the award of any scholarship thereunder, nevertheless limiting prizemen to boys of British paternal ancestry pursuing studies in applied sciences, agriculture and allied subjects (“Criteria for Award”).

10.  Since the Vesting Order, KGV has in effect administered the Charity, which has granted awards to KGV pupils studying universities in Hong Kong or abroad. 

11.  The only material asset comprised in the trust fund of the Charity is a bank account managed by the Custodian-Trustee with a current balance of approximately £145,000 (about HK$1,500,000 at the current exchange rate).

The proposed scheme of variation

12.  By the present application,

(1)  The Custodian-Trustee wishes to be discharged as trustee and its role is to be taken up by the Trustees and ESF (“discharge application”); and

(2)  The Trustees seek to amend and restate the terms of the Charity as set out in the proposed Draft Deed (“amendment application”).

Legal principles

13.  Under section 57A of the Trustee Ordinance, Cap 29, an application may be made by one or more of the trustees or persons administering a charitable trust, or persons claiming to administer the trust, for the purposes of the better administration of the trust and the Court may provide such relief or directions as it thinks just.

14.  Pursuant to Order 120, rule 4 of the Rules of the High Court, the Secretary for Justice (“SJ”), in her capacity as parens patriae, is joined as a respondent.  Following correspondence between solicitors for the Applicants and SJ and service of the written submission on SJ, SJ has elected to adopt a neutral stance with regard to the present application.

Discharge application

15.  There is no provision in the copy Memorial governing discharge or appointment of trustees.

16.  The Charity’s material assets are comprised in a bank account. There is no technical or practical complexity in administering the same that will require the input of a professional trustee.

17.  The retirement of a remunerated professional trustee would, other things being equal, be beneficial to the Charity, as it leaves a greater proportion of funds available for making awards in pursuance of the object of the Charity in Hong Kong.

18.  The Trustees for the time being are willing and able to take up, as volunteers, the functions of the Custodian-Trustee.  ESF will continue to supervise and oversee the Charity.

19.  There is no suggestion that the Custodian-Trustee has been in breach of trust. There is nothing to cast the integrity of the Trustees in doubt; and they are fit and proper persons to be appointed.

20.  In my view, it is expedient to discharge the Custodian-Trustee, appoint new trustees under section 42 of the Trustee Ordinance and make a vesting order vesting the Charity’s assets in the new trustees.

Amendment application

21.  It is proposed to change the Criteria for Award and to make amendments that reflect the current best practices for drafting deeds governing charitable trusts.  The reasons are as follows.

22.  Firstly, the student body of KGV has changed in its demographic composition over the years.  It has been difficult to find suitable candidates who meet the Criteria for Award.

23.  Secondly, KGV is a co-educational institution responsible for the education of multicultural pupils.  Each of the Trustees, ESF and the Custodian-Trustee are in the circumstances satisfied that expanding the pool of candidates for the award to all meritorious pupils of KVG, regardless of gender, ancestry, race or nationality, would be consistent with the ESF object and statutory mandate of promoting education in the English language in Hong Kong for all residents in Hong Kong.  The grant of awards shall remain on the basis of scholastic merits alone.

24.  Thirdly, a criterion on residence is included in that the award may only be made to a pupil who has been ordinarily resident in Hong Kong for not less than 3 consecutive calendar years immediately prior to the date of the award. That is to ensure that the prizemen have a close connection to Hong Kong and is consistent with paragraph 7 above.

25.  Fourthly, the subject of university education is slightly amended to the fields of technology, engineering, synthetic chemistry, agriculture, horticulture, and/or any other applied science.  That amendment takes into account intervening technological developments, and reflects the fields of study that the settlor wished to promote.

26.  I have read the Draft Deed which has been prepared with the benefit of legal advice.  The Draft Deed is consistent with best practices for charitable trust in Hong Kong and does not detract from the object of the Charity.  The proposed scheme will not cause the Charity to cease being a charity under Hong Kong law.

27.  The liberalization of the Criteria for Award further since the Vesting Order reflects the social and cultural context of the English education provided by ESF in Hong Kong as evolved through time.  The amendment is more likely to advance the sole object of the Charity, being advancement of education by granting awards to meritorious pupils of KGV. 

28.  The Draft Deed would also solve the practical difficulty of the original trust instrument being lost.

29.  The amendment application is justified.

Conclusion

30.  For all the reasons given, I am of the view that the discharge application and amendment application are made for the purpose of better administration of the Charity without in any way undermining the object for which the Charity was set up.

31.  I therefore grant an order in terms of the originating summons as follows:

(1)  The Custodian-Trustee be discharged forthwith as trustee of the Charity and be relieved from any personal liability it may have incurred for any breach of trust or otherwise as trustee of the Charity, save for fraud, dishonesty and/or wilful misconduct;

(2)  The 1^st to 3^rd Applicants are appointed as trustees of the Charity and that all the property for the time being comprised in the fund of the Charity are to vest in the Trustees;

(3)  The instrument governing the Charity be varied as per the Draft Deed; and

(4)  There be no order as to costs.

32.  I thank Mr Mariani for his assistance.