TO KAN CHI AND OTHERS v. PUI MAN YAU AND OTHERS

HCMP 6907/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

HIGH COURT MISCELLANEOUS PROCEEDINGS 6907 OF 1998

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. On 12 January 1999, Mortimer V-P, sitting as a single judge of this court, reversed an order made below by Yam, J. on 19 December 1998 to the extent that that order, in effect, released to the plaintiffs in the action before the judge a sum of $20m, part of some $300m standing in court to the credit of the action. As to the balance of the money, the judge had stayed payment out of that balance to the plaintiffs pending an appeal by the unsuccessful defendant the Secretary for Justice against the judge's order in favour of the plaintiffs made on 26 November 1998.

2. When the matter came before the Vice-President, the Secretary for Justice had not yet given notice of appeal but has now done so.

The case for the plaintiffs

3. The plaintiffs, objecting to Mortimer V-P's order, say that this sum of $20m ought to be released to them as Yam, J. had originally ordered. They need the money, they say, for the purpose of legal costs (some $4m) and the rest for the costs of repairing a Chinese temple, the Tsing Wan Kun, a temple within a monastery known as the Tsing Shan Monastery.

The case for the Secretary for Justice

4. The Secretary for Justice is concerned that the $20m if released to the plaintiffs will not be recoverable, or at any rate easily recoverable, in the event of the Secretary for Justice succeeding in her appeal. The Secretary for Justice accepts that if proper security were afforded by the plaintiffs for the restoration of the $20m in the event of the appeal of the Secretary for Justice being successful, there could be no objection to the present application. In fact an offer of security has today been made, and the real question now is whether that offer is acceptable. But first, I must say something of the background.

The background

5. The substantial dispute is between the Secretary for Justice on the one hand and the plaintiffs on the other hand. The Secretary for Justice claims the fund in court on the basis that the moneys are held for charitable purposes.

6. The plaintiffs claim to be beneficially entitled to the money. There are, in effect, two sets of plaintiffs, although of course, they can only make common cause in these proceedings. But, as between themselves, it may be that each of them has separate claims to the funds in court. One set of plaintiffs claims as managers of a T'so called the To Ka Yi T'so ("TKYT"). The other set of plaintiffs claims as representatives of the To clan.

7. All the plaintiffs are anxious to obtain a release of the $20m now for the purposes I have already stated.

The order of Mortimer V-P

8. The judge was content to allow such release but Mortimer V-P disagreed with him. Mortimer V-P appreciated that when a party has won an action and a money sum is involved, that party is entitled, in principle, to the money as the fruits of the litigation, even if the losing party seeks to appeal and has grounds of appeal which seem reasonably likely to succeed. But he recognised that there were occasions when a court might be prepared to order a stay pending the appeal so that the money should remain where it was until the determination of the appeal, and he thought this was such a case, not only as to the bulk of the money, but also as to the $20m which Yam, J. had thought might be released to the plaintiffs. The Vice-President accepted that there was property available to the plaintiffs which, if the $20m was ordered to be returned to the Secretary for Justice in the event of her succeeding in her appeal, would be of sufficient value for that purpose. But he added :-

"I conclude, therefore, that the T'so would be worth the money if it can be recovered. When it comes to the question of the ease of recovery - should it come to it - I am afraid I take the view that that would not be an easy matter. It is well known in these courts that to recover money from or to persuade T'so managers to submit to court orders is never a very straightforward matter. There are often difficulties which arise from the New Territories Ordinance (Cap. 97) and the application of s.15. That is a matter that I have to bear in mind. Had the matter been left there, I would have been inclined not to grant the stay applied for, but there are other matters. First, the history of the proceedings which have been going on for a very long time. The effect of a stay will be to delay the conclusion of them for, say, six months. Having regard to the long history, this is not a great period.

Second, I bear in mind that the stay of the main sum is accepted to be correct in principle. Third, the intention is to use the money for legal costs and repair to the Temple. So far as legal costs are concerned, those are in the order of $4m. The rest, presumably, is to be spent on repairs to the Temple.

Mr Patrick Fung SC takes a further point that even if he fails in challenging the judge's finding that the plaintiffs were owners of the Tsing Wan Kun Temple, the Chinese Temple Ordinance provides that the funds would have to go into the hands of a committee under the Ordinance. I, of course, am not in any position to decide that point. Nor do I. But it would appear from a glance at the provisions of the Ordinance that he has a highly arguable point. So, even if he fails on the ownership, this point remains to be resolved.

One must ask also how much can be done which incurs the expenditure of money on repairs as opposed to the preparation for such in the next few months. I doubt very much whether anything useful could be done. So far as the expenditure on the Temple is concerned, I would have thought there is a very strong case for not spending money of that kind until this appeal has been resolved.

In those circumstances, and for those reasons which I have attempted to set out, I would grant a stay of the $20m as well as the stay that has already been granted by Yam J."

Was Mortimer V-P right?

9. Both sides have challenged Mortimer V-P's reasoning.

10. For the Secretary for Justice, it is said by Mr. Patrick Fung, S.C. (a) that the property is not necessarily worth as much as the plaintiffs have suggested; and (b) that in any case, as a matter of law, that property is not necessarily available anyway because it is property which appears to be the property of an unincorporated association which has no legal identity and is not necessarily property to which the Secretary for Justice could have recourse.

11. In the absence of an order of the court entitling them to bring or defend proceedings at the expense of the trust property, it does appear to be at any rate highly arguable that the managers of the T'so would have no legal right to apply the $20m in repaying the sum released to them back to the Secretary for Justice. They would be, of course, personally liable to do so, but that is another matter. So, there is, I think, substance in Mr. Patrick Fung, S.C.'s criticism of Mortimer V-P's reasoning on this point.

12. As to the other matters, the criticisms come from Mr. Edward Chan, S.C., for the plaintiffs.

13. First, he says, the Vice-President's reliance on the timing of the matter is misplaced, since it now appears the appeal will not be heard before December 1999, a much longer time away than the judge had in mind when taking this matter of timing into account.

14. I am inclined to accept this criticism, too. It is clearly going to be some time before this appeal is determined and, if the temple is in disrepair and needs to be repaired, it can only make matters worse to delay the repairs.

15. Secondly, Mr. Edward Chan, S.C. points out that when Mortimer V-P says that he bears in mind "the stay of the main sum is accepted to be correct in principle", he has taken into account an irrelevant consideration. Why should it matter that the stay of the main sum was accepted to be correct in principle, when we are now concerned only with the stay in relation to a smaller sum for a special purpose? I think there is force in this criticism too.

16. Thirdly, Mortimer V-P says "the intention is to use the money for legal costs and repair to the temple". This seems to me to be a good reason for releasing the money now, not a bad one, as Mortimer V-P seems to have thought.

17. Fourthly, Mr. Edward Chan, S.C. objects to the point taken based on the possibility that there may be a case for saying that the funds ought to go to a committee appointed under the Chinese Temple Ordinance. There seems force in this too, for the point seems to be hardly in question in these present proceedings, and adds nothing to the debate.

18. So, if the matter had rested there, I would not myself have been inclined to support the reasoning of Mortimer V-P here on these minor points. But it does not matter, for like Mortimer V-P, I too take the view that the essential point is that "it would not be an easy matter" for the Secretary for Justice to recover the $20m if spent by the plaintiffs on legal costs and on repairs to the temple, and that is quite sufficient to support his conclusion.

The need for security

19. In fact, having regard to the way these proceedings have been constituted (as to which I will say no more at this stage) the recovery of any money from the plaintiffs would have to come from the plaintiffs individually. There is nothing to show that the plaintiffs individually are capable of restoring the $20m if they are ordered to do so. The only possible way, it seems to me, in which the court could exercise its discretion in favour of allowing the plaintiffs to have this $20m released to them now would be against an offer of proper security. After some prompting from the Bench, an offer in the following terms was made this afternoon through Mr. Edward Chan, S.C. on behalf of the plaintiffs :-

"The Plaintiffs through their solicitors undertaking that in the event of the Secretary for Justice succeeding in the appeal before the Court of Appeal, and in the event of the Court of Appeal thinking fit to so order, the Plaintiffs will submit to an order for the repayment of the sum of $20 million released to the Plaintiffs' solicitors from funds in Court, and the 1st Plaintiff as managers of the TKYT shall also submit to any charging order over the land of TKYT to secure the repayment of any sum ordered by the Court.

The Plaintiffs through their solicitors further undertake that the Plaintiffs will not, except with the leave of the Court, dispose of any land of TKYT pending the determination of the appeal, and in the event of the Court of Appeal ordering the repayment of any sum of money released from funds in Court, shall at the request of the Secretary for Justice agree to give a legal mortgage of such of the land of TKYT as the Secretary for Justice may direct, and to use their best endeavour to obtain the consent of the Secretary for Home Affairs to do so."

20. But the Secretary for Justice through Mr. Patrick Fung, S.C. has refused to accept that these various undertakings afford her sufficient security. In those circumstances, it falls to us to consider for ourselves whether there is sufficient here to protect the interest of the Secretary for Justice such that we ought to order the release of the $20m to the plaintiffs. I will now proceed to examine the undertakings offered.

21. The first undertaking carries the matter no further. An undertaking on the part of the plaintiffs to submit to an order for the repayment of the $20m is of no value. If they lose, they would have to submit to such an order anyway.

22. The second undertaking, that the 1st plaintiffs as managers of the TKYT would submit to any charging order over the land of TKYT to secure any payment of any sum ordered by the court, raises a question as to whether the managers have power to offer that undertaking or to submit to any such order. Quite apart from the question whether even the court would have power to subject the land of TKYT to such an order, in my judgment, this undertaking is fraught with uncertainties of enforcement and is not sufficient to afford the Secretary for Justice the security to which she is entitled.

23. The third undertaking is that the plaintiffs will not dispose of the land of TKYT pending the determination of the appeal. But the mere undertaking not to dispose of the land does not offer the Secretary for Justice any security at all. It simply is not sufficient to protect the interests of the Secretary for Justice. It does not in itself secure the payment of the money.

24. The fourth undertaking, to give a legal mortgage of the land, is obviously valuable. But it is one which, as the plaintiffs accept, would require them to obtain the consent of the Secretary for Home Affairs in order to honour it and that consent has not been obtained. The plaintiffs are no doubt prepared "to use their best endeavours" to obtain that consent but that too is not sufficient, for the Secretary for Home Affairs may refuse to give his consent. Mr. Edward Chan, S.C. submitted to us that it would be "unthinkable" that he should refuse his consent but I find it quite impossible to accept this. The Secretary for Home Affairs might have all sorts of reasons why he would think it right to refuse, rather than to grant, his consent to this proposal. It would involve a dealing with the land which could not be justified unless authorised under s.15 of the New Territories Ordinance, Cap. 97. This court cannot authorise a dealing with the land which dispenses with the protection given by the legislature for the persons beneficially interested in that land by reasons of the provisions of s.15. That would be quite wrong.

Result

25. For the reasons I have given, I would reject the plaintiffs' offer of security as insufficient and so I would not disturb the order made by Mortimer V-P.

26. I would only add this; that if, at any time hereafter, the plaintiffs are able to offer some proper security for the repayment of the $20m, then I see no reason why a fresh application for the release of that sum should not be made to the court. If, for example, having considered our judgment, the plaintiffs find themselves able to persuade the bank or some other proper person to give a guarantee which would offer sufficient security to the Secretary for Justice for repayment of the money, then that can be offered and if rejected, can be put before the court. Alternatively, if the plaintiffs, on an approach to the Secretary for Home Affairs, find him sympathetic to their request, and willing to go through the procedure prescribed by s.15, then, again, there is no reason why such a mortgage as is now suggested should not then be offered to the Secretary for Justice as affording her proper security, premature though it was to offer such security at this stage.

27. There is nothing else I can usefully add. This appeal must, in my opinion, be dismissed.

Liu, JA:

28. The crucial question would seem to lie in the ease or otherwise of recovery of the $20m if the Secretary for Justice should succeed. It is unclear whether the three 1st plaintiffs have authority to prosecute the proceedings on behalf of the T'so and whether the five 2nd plaintiffs have the like authority with respect to the To Clan. The $20m under consideration will be, in part, for the reimbursement of the costs incurred, which is not shown, in the circumstances, to have been properly incurred by these plaintiffs for the T'so or the To Clan. I am not persuaded that recovery of the $20m by a charge and equitable execution on the T'so land would meet with no resistance; in other words, that recovery of the $20m would be entirely trouble free. In my view, of its own, this is sufficient justification for exercising the court's discretion in favour of the Secretary for Justice in the application before Mortimer, VP for imposing also the partial stay. The T'so land is the only available sufficient security for repayment of the $20m which is sought to be released pending appeal. No bank guarantee is offered, and none of the plaintiffs is said to be good for $20m. For these reasons, I, too, would dismiss the appeal.

Rogers, J.A. :

29. I agree that this application must be dismissed.

30. The plaintiffs have today offered an undertaking that To Ka Yi T'so shall submit to a charging order over the land as To Ka Yi T'so to secure the repayment of any sum ordered by the Court. It seems to me that in effect what the Plaintiffs are attempting to do is to use the land of To Ka Yi T'so as security for repayment of the $20 million should it be necessary to do so. I have doubts as to whether this is a proper thing for them to do, but, in any event, it seems to me, that the submission to this order is an attempt to circumvent the obtaining of the consent of the Secretary for Home Affairs by, in effect, asking the Court to make an order under the guise of not objecting to it.

31. I would, however, go on to say that I do not necessarily agree that the factors taken into account by Mortimer, V-P are irrelevant or wrong. They seem to me to merge into one. The bulk of the $20 million which is sought is to be used to repair the temple and the fact that the Vice-President thought that the appeal would be heard earlier than now seems likely to be the case does not really, in my view, affect the matter greatly. These proceedings have taken a long time in any event. Apart from the aborted first trial, the second trial, the major trial, itself took exactly 6 months to be heard. The need for repairs is not something new. I am by no means satisfied that it cannot wait the outcome of the appeal.

32. In the light of the fact that it is not disputed that there should be a stay of the payment of the bulk of the money under the judgment, the $4 million for costs should only, in my view, be properly released if the money could be recovered.

33. For the reasons which have been given, I consider there are difficulties in that respect such that I consider it would be wrong for this Court to release any part of the $20 million at this stage.