RE CHU CLANSMEN’S FRATERNITY ASSOCIATION LTD AND OTHERS

HCMP 677/2024

[2024] HKCFI 1974

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 677 OF 2024

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JUDGMENT

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1.  Introduction

1.1  This is my judgment on the Applicants’ ex parte originating summons (“OS”) in respect of the 3 properties defined therein.

1.2  The 1^st Applicant was incorporated on 17 November 1972. The 2^nd and 3^rd Applicants are members and directors of the 1^st Applicant. The OS seeks the following relief:

(1)  A declaration that, since its incorporation, the 1^st Applicant has been the sole beneficial owner of the Properties (“Relief 1”);

(2)  An order that the whole of the legal title and interest in the Properties be vested in the 1^st Applicant (“Relief 2”).

2.  Factual background

2.1  In 1953, a number of businessmen with the family name “Chu” founded the Chu Clansmen Fraternity Association (朱氏宗親會) (“Association”). Thereafter:

(1)  On 19 July 1960, the 1^st Property was acquired to provide a permanent meeting place for the Association. The 1^st Property was acquired in the names of Chee You Tong (“CYT”), Chu Yang Kau and Chu Yee Sun, respectively the Honourary Chairman and Vice Chairmen of the Association;

(2)  On 13 March 1962, the 2^nd Property was acquired in the names of CYT, Chu Mon Tan and Gee Boo Kip, the latter two being respectively the Honourary Consultant and Chairman of the Association. The 2^nd Property was acquired by CYT and represented his contribution to the Association’s permanent welfare fund (永遠福利基金) (“Fund”);

(3)  On 12 July 1969, the 3^rd Property was acquired in the names of 5 committee members of the Association, namely Chee Sang Woo, Chu Yiu Chau (“CYC”), Chu Tit Wor (“CTW”), Chu Yip (“CY”) and Chu Kwok Choi. The source of the purchase price was provided by the Fund.

2.2  The persons in whose names the Properties were conveyed are hereinafter collectively referred to as “Trustees”.

2.3  Following the incorporation of the 1^st Applicant:

(1)  All contactable members of the Association who were not in arrears with their subscriptions and other monies payable to the Association automatically became members of the 1^st Applicant;

(2)  CYC, CTW and CY became the first subscribers of the 1^st Applicant;

(3)  All the business of the Association has been taken over by the 1^st Applicant;

(4)  The Association ceased admitting new members and all new members have instead been registered with the 1^st Applicant;

(5)  On 11 April 1973, the 1^st Applicant moved from the 1^st Property to another location;

(6)  The Properties have been used and managed by the 1^st Applicant. All outgoings of the Properties have been discharged by the 1^st Applicant and all income derived from the Properties has been used for the benefit of the 1^st Applicant;

(7)  The Properties have always been treated as an asset of the 1^st Applicant in its audited accounts, and no member of the Association has ever complained or objected to the Properties being so treated by the 1^st Applicant, nor has any one of them asserted any claim to a beneficial interest in the Properties.

(8)  The 1^st Applicant has kept the title deeds of the Properties;

(9)  The Association has become defunct although no step has been taken to formally dissolve it.

2.4  The evidence shows that, by now, the Trustees would have been more than 100 years old. In respect of the 1^st Property, at least two of the Trustees have passed away. In respect of the 2^nd Property, one of the Trustees has passed away. In respect of the 3^rd Property, at least three of the Trustees have passed away. As to the remainder, the evidence shows that the Applicants are unable to verify whether they are still alive, where they are or who are their personal representative(s) or next-of-kin.

3.  The present application

(i)  Relief (1)

3.1  Prior to the incorporation of the 1^st Applicant, it is the Applicants’ case that the Properties were held by the Trustees on trust for the then existing members of the Association, subject to their respective contractual rights and liabilities towards one another as members of the Association.

3.2  Following the incorporation of the 1^st Applicant, it is the Applicants’ case that the members of the 1^st Applicant have conducted themselves as though the 1^st Applicant is beneficially entitled to the Properties. The following matters are relied upon:

(1)  A resolution passed at the 3^rd Annual General Meeting of the 1^st Applicant members of the Association were to automatically become members of the 1^st Applicant;

(2)  A further resolution passed at the 3^rd Annual General Meeting as shown in the minutes to approve the rent received from the Properties to be used to defray the 1^st Applicant’s operating costs (“Relevant Resolution”);

(3)  The Association ceased to admit new members and its business was taken over by the 1^st Applicant. For example, the Properties were treated as assets of the 1^st Applicant in the audited accounts, and the 1^st Applicant had applied income derived from the Properties to defray its expenses.

3.3  The Applicants say that members of the Association have effected a novation of the terms of their relationship when the 1^st Applicant was incorporated or are estopped from asserting a beneficial claim in the Properties.

3.4  I accept the Applicants’ submissions that the foregoing propositions are supported by Chap Yick Clansman’s Association Ltd v Mok Fai [1997] 1 HKLRD 580.

3.5  In relation to the pre-incorporation phase, I accept the Applicants’ submissions that the circumstances of the present case fall within the fourth method of holding property of unincorporated associations, namely a trust for members: Chap Yick at page 585C-D.

3.6  In relation to the post-incorporation phase, whilst it is the Applicants’ submission that the Relevant Resolution may be regarded as a declaration of trust in compliance with section 5(1) of the Conveyancing and Property Ordinance Cap 219, I have some hesitation on whether the terms of the Relevant Resolution are clear enough for that purpose, as they appear to make reference only to the income derived from the Properties, as opposed to the interests in the Properties.

3.7  I, however, accept the Applicants’ submissions on novation and estoppel. As stated at Chap Yick at page 587B-F:

“Rather, by approving and adopting the Articles of Association, the members effected a "novation" of the terms of their relationship inter se. There is also the resolution passed by the members of the Company at the EGM of 8 October 1969. Whilst the decision or resolution to transfer was ostensibly made by the Company rather than the Association, there was no difference in the composition of members given that members of the Association automatically became members of the Company and during that period the records do not reveal any change in membership. The only two members who are on record as ever having raised any objection appeared to have subsequently abandoned it and, in any event, have never asserted any claim to a beneficial interest in the Property itself.

Since the incorporation of the Company, for over 20 years before the Company came to be appointed a trustee of the Declaration of Trust, and since it became one of the trustees, all relevant parties have conducted themselves on the footing that the Company was and is beneficially entitled to the Property. This is wholly consistent with the "novation" of the pre-incorporation contractual relationship of the members inter se which coupled with the resolution of 8 October 1969 constituted a sufficient direction. In any event, on the facts, members of the Association immediately prior to its incorporation would be estopped from asserting a beneficial claim to the Property. In these circumstances, I hold that the Company rather than the members of the Association as at 29 April 1969 is beneficially entitled to the Property and that the Property is held by the Trustees in trust for the Company.” (emphasis added)

(ii)  Relief (2)

3.8  The Applicants rely on, inter alia, section 45(d) of Trustee Ordinance Cap 29 (“TO”). In gist, where it is uncertain whether the last trustee known to have been entitled to or possessed of any interest in land is living or dead, the court may make a vesting order.

3.9  I accept that the Applicants have no means to verify with certainty the status of the last known trustees, as they do not have a record of their HKID numbers or hold information of their next of kin. A general search at the Probate Registry has returned no useful result.

3.10  I further accept the Applicants’ submissions that the present application may be made by way of an ex parte summons: Re Choi Yuk Tin [2023] HKCFI 1639 at §10 (applied by analogy) as that case is one on section 45(e) of the TO. In so far as necessary, I would also have waived any procedural irregularities due to the overwhelming evidence that the 1^st Applicant has all along been treated as having beneficial interests in the Properties without objection: Re Lee Yang, Shiu Chuen Joyce [2021] 4 HKLRD 252 at §§21-25.

3.11  In my view, the conditions for making a vesting order are satisfied.

4.  Conclusion

4.1  For the above reasons, I make an order in terms of OS §§1 and 2.

4.2  As invited by the Applicants, I make no order as to costs.