THE TRUSTEES OF THE KOWLOON CITY BAPTIST CHURCH v. KOWLOON CITY BAPTIST CHURCH KAI FUK CHAPEL AND OTHERS

HCMP 2104/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2104 OF 2008

----------------------

----------------------

----------------------

--------------------------

J U D G M E N T

------------------------

1.  The Plaintiff is incorporated by statute under Cap. 1093.  In this matter, the Plaintiff seeks a declaration that it is the sole legal and beneficial owner of a property acquired in its name in January 2003.  The purpose of the acquisition was to facilitate the establishment of a new church called the Kai Fuk Chapel.

2.  The purchase price was paid by the Plaintiff.  At the time of acquisition, a group of members of the Plaintiff’s church had started worshipping and other activities at another premises for some time.  They were originally called the Kai Fuk Reading Room and Elderly Centre.  By November 2002 when the Plaintiff decided to purchase the property, the centre was called Kai Fuk Chapel.  The purchase price was paid by the Plaintiff.  Separate accounts were maintained by the chapel.  The intention of the Plaintiff was that Kai Fuk Chapel would eventually be incorporated as a new church and in the meantime, certain sums were transferred from the Kai Fuk account to that of the Plaintiff as “repayment of loan” for the acquisition.  Out of the $2,000,000 purchase price, the Kai Fuk Chapel had “repaid” $820,000 from donations received from those attending the chapel.

3.  When the property was acquired, the Plaintiff executed a declaration of trust.  The declaration was registered at the Land Registry.  In the declaration, it wrongly stated that the purchase price was provided by the chapel.

4.  The plan to establish a new church did not materialize.  Kai Fuk Chapel was not incorporated.  On 28 November 2007, the Plaintiff’s church passed a resolution to cease its operation with effect from January 2008 with its members “returning” to the mother church.  The chapel also passed resolutions regarding handing over the property back to the mother church and the transfer of its funds back to the account of the mother church on 4 October 2007.

5.  Having considered all the evidence before the court, even though there was separate accounts maintained, it is clear to me that the Plaintiff’s intention has always been that the chapel would only become an independent entity upon its eventual incorporation.  Until that event occurs, the Kai Fuk Chapel remains part and partial of the mother church and its members remains members of that church even though they conducted their activities at a separate premises.  It is analogous to a branch office of a company.  Thus, ultimately the Plaintiff’s church had the power to terminate its operation as it did in November 2007.  Of course, for good measure, the church did not exercise that power until those at the chapel passed a resolution to “return”.

6.  Given that legal analysis, notwithstanding the maintenance of separate accounts and having its own management committee, at all times Kai Fuk Chapel remained as part of the Plaintiff’s church.  As a matter of law, the account of the chapel should be regarded as a sub-ledger of the church.  It also follows that legally speaking there cannot be any loan from the church to the chapel, since an entity cannot be its own creditor or debtor.  The transfer of funds between the two accounts can only be regarded as movement of funds between different ledgers of the church.

7.  By the same token, the Plaintiff cannot settle a trust in favour of the chapel as an entity independent from the church.

8.  The donations to the chapel, in legal terms, were donations to the Plaintiff’s church.  Members of the chapel were, at all times, members of the church.

9.  At the highest, the declaration of trust can only be regarded as a declaration of intent on the part of the Plaintiff that upon the incorporation of the chapel as a separate entity, the property would be given to the new entity.  That purpose had failed given the cessation of operation of the chapel before its incorporation.

10.  I shall therefore grant a declaration that the Plaintiff has at all times since the purchase of the property in 2003 been and still is the sole legal and beneficial owner of the property.  There is no need for any vesting order to be made.