LAI KAM MAN AND OTHERS v. WONG JING AND OTHERS

HCMP 2132/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2132 OF 2013

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D E C I S I O N

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Introduction

1. There are two summonses calling for my determination.  The first in time was taken out by the plaintiffs for their application for the appointment of Messrs. Johnson Kong and Kenneth Yeo (“JKKY”) to act as interim receivers and managers of the 12^th defendant, namely, the Tsung Tsin Association (“the Association”) pending determination of these proceedings (“the R & M Summons”) pursuant to Order 30 rule 21, RHC. All the plaintiffs are the members of the Association.  So are all the individual defendants.

2. About two months after the R & M Summons was issued, the 1^st to 11^th defendants save the 8^th defendant took out a summons to strike out the Originating Summons (“the Striking out Summons”).  For ease of reference, unless otherwise specified, references to the defendants in this Decision are references to all the defendants excluding the 8^th and 13^th defendants and the Association.

3. The 8^th defendant is not represented and has not taken any part in the two summonses.  The 13^th defendant, namely the Secretary for Justice was joined in these proceedings as parens patriae.  Mr Shay, for the 13^th defendant, indicates that he adopts a neutral stance in respect of both summonses and thus makes no further submissions in relation thereto.

4. The parties agree that this court should deal with the Striking out Summons first.

Background

5. At the outset, I shall briefly state the background of these proceedings.  The plaintiffs issued the Originating Summons (“the OS”) to apply for, firstly, a declaration that the Association has been a public charity and/or a public charitable trust and/or a trust of public character and then further reliefs including the intervention of the Secretary for Justice with a view to better administration of the public charitable trust constituted in the Association.  It was issued expressly pursuant to section 57A of the Trustee Ordinance, Cap. 29 and Order 120, RHC It also seeks to invoke the inherent jurisdiction of this court.  The said two provisions are related to charitable trusts.

6. It is clear that in these proceedings the plaintiffs must establish as a matter of fact that as presently constituted, the Association administers a public trust and hence their application does fall within the ambit of the said two provisions.  The OS was filed together with a supporting affirmation by way of the Affirmation of Lai Kam Man, the 1^st defendant.  The defendants have yet to file their evidence to oppose the application by way of the OS.  Understandably, the parties now focus on these two interlocutory applications.

Striking out Summons

7. There is no dispute about the applicable general principles.  The defence agrees that to succeed in their striking out application, they have to show this is a plain and obvious case.  The essence of the defendants’ case is that the Association is never a charity and the plaintiffs can never be entitled to a declaration to the effect that the Association is a charity and other relief on the basis that it is a charity.  Therefore, they have to satisfy this court it is an open and shut case that the Association is not a charity and as such this court should exercise its summary power to strike out the OS.  Disputed facts are to be taken in favour of the party whose pleading is sought to be struck out, i.e., the plaintiffs and this court should not attempt to resolve difficult legal questions in this application: Hong Kong Civil Procedure 2015 Vol.1 §18/19/4. 

8. The defence also contends that the defendants were not proper party in these proceedings in any event and the OS as against them should be struck out.  The defence argues that should this court find that the Association is plainly not a charity and/or the defendants are improperly joined, this court should strike out the OS as disclosing no reasonable cause of action, being frivolous or vexatious and an abuse of the process of the court under Rule 19(1)(a), (b), (d) and/or its inherent jurisdiction.

Is the Association plainly not a public charity?

9. Both parties agree that to qualify as a public charity, the Association has to satisfy the three requirements set out by Tang VP (as he then was) in Cheung Man Yu v Lau Yuen Ching & Ors [2007] 4 HKC 314 at 320 (§24):

“First, the purposes of the institution must have charitable character that is, they must be within the spirit and intendment of the preamble to the Charitable Uses Act 1601. Secondly, the institution must exist for the benefit of the public and, thirdly, it must be exclusively charitable.’ Tudor on Charities, (9^th Ed), para 1-002 at p 2.”

10. The learned judge further explained the first two requirements in the following two paragraphs:

“25. In Lord Macnaghten’s famous words in The Commissioners For Special Purposes of the Income Tax v Pemsel [1891] AC 531 at 583:

“‘Charity’ in its legal sense comprises four principal divisions: trusts for the relief of poverty; trust for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads. …”

26. We understand, by public charity, it is meant a charity in its legal sense; it is public in the sense that it must exist for the benefit of the public. As Tudor on Charities pointed out in para. 1-008 at p. 7:

“… it was established by the Court of Chancery that a trust, in order to be charitable, must be of a public character, that is, it must be for the benefit of the community or an appreciably important section of the community. This requirement may involve the consideration of two questions which are closely related, first, whether the purposes of the trust confer a benefit on the public or a section of the public, and secondly, whether the class of persons eligible to benefit constitutes the public or a section of it. …””

11. To find out whether the Association satisfies all these three requirements, this court should first study its Memorandum of Association dated 15 April 1959 (“the MA”) and the objects clause contained therein should play a leading role: Incorporated Council of Law Reporting for England and Wales v. A-G [1972] 1 Ch. 73 at p.84B per Russell L.J..  The relevant objects clause is Clause 3 and it consists of 26 sub-clauses (collectively “the Objects Clauses”).

12. The position of the defence is that the Association satisfies none of the three requirements.  I shall deal with each of the defence’s challenges in turn.

1^st Requirement – Charitable Character?

13. For the 1^st requirement, the question is whether the Association clearly cannot fall within any of the four heads of charity identified by Lord Macnaghten in Pemsel.  The defence contends that the main objects in the MA do not fall within the first 3 heads and the plaintiffs could only pray in aid the 4^th head.  On that score, Ms Wong, appearing with Mr Lam for the defendants, reminds me that not all objects which are beneficial to the public are charitable: A-G v National Provincial & Union Bank [1942] AC 262 (H.L.) per Viscount Cave LC at p.265.

14. I  do not agree that the plaintiffs have only the 4^th head to rely on.  Without making a finding as to whether the objects of the Association may fall within the 4^th head, I find it at least arguable that Clause 3(j) “To advance and promote learning and education and to grant scholarships and prizes” may place the Association in the category of those trust for the advancement of education.  Accordingly, it is at least arguable that the 1^st requirement can be satisfied.

15. I then focus on the 2^nd and 3^rd requirements, which I believe are the real controversy between the parties.  In her thorough and persuasive submission, Ms Wong highlights the difficulties of the Association in meeting these two requirements.

2^nd Requirement – Public Character?

16. Ms Wong contends that the Association cannot be said to be for the benefit of the community or an appreciably important section of the community. Thus, it fails to meet the 2^nd requirement.

17. Clause 3(b) provides that the object is “to promote and protect the industrial, commercial and other lawful interests of Hakka Community resident in the Colony of Hong Kong, China and abroad (“the Hakka people”)”.  Ms Wong submits that the Hakka people so defined in the MA cannot constitute a sufficiently identifiable section of the public.  She relies on Keren Kayemeth le Jisroel Ltd v IRC [1932] AC 650 and Williams’ Trustees v. IRC [1947] AC 447.

18. In Keren’s case, the House of Lords refused to accept that the Jews all over the world or all the Jews in the Promised Land could qualify to be a community.  Lord Thankerton had this to say,

“It seems to me that “community” predicates the existence of some political or economic body settled in a particular territorial area, and that the trust must be for that political or economic unit or a particular class within that particular political or economic unit.”

19. In addition, Lord Tomlin expressed his difficulties in accepting the existence of a community if Jews outside the prescribed region were also included.  Lord Tomlin said this at p.659,

“They next suggest that it is the Jews in the prescribed region, but I have great difficulty in seeing why they should be the community because, although the Jews who are to be settled under the objects no doubt include Jews in the prescribed region, there are also included Jews outside the prescribed region, and whether a settling of Jews from outside the prescribed region is for the benefit of Jews within the prescribed region - it may or may not be; I do not see any indication one way or another – I think it is extraordinarily difficult to say that within the meaning of the cases there is really any community to be found in the circumstances before your Lordships’ House.”

20. In Williams’ Trustee, Lord Simonds found a trust for the Welsh people devoid of a public character.  After referring to Keren’s case, Lord Simonds came to the conclusion that he would not have less difficulty than the community of Jews in Keren’s case in finding the community given the definition of Welsh people[1].

21. Here, the Association aims at the Hakka people, both here and abroad (including the Mainland).  It is very much akin to Keren’s case and Williams’ Trustee.  It is plain and obvious that the Hakka people so defined are not confined to any particular political or economic body settled in a particular territorial area.  Therefore, I am of the view that the Hakka people cannot possibly amount to an identifiable section of the public for the purpose of a charity.  It is clear to me that the Association has no chance to meet the 2^nd requirement.

22. Little was heard from the plaintiffs about this challenge.  It is submitted that the Hakka community made up a sizable population in Hong Kong.  In this regard, the plaintiffs rely on a book review found on the internet posted on 23 September 2010.  The book under review was entitled “Hong Kong Hakka People” and Professor Lau of the Chinese University of Hong Kong was the author.  It was stated in the book review that there were about 2 million Hakka people.

23. Be that as it may, the population of Hakka people in Hong Kong, however large, cannot cure the deficiency in the Objects Clauses. It is the inclusion of other Hakka people in all over the world that negatives the existence of a community for the purpose of a charity.

24. For completeness, I should mention that Mr Chan, appearing for the plaintiffs leading Mr Chong and Ms Wong, seeks to distinguish Williams’ Trustee from the present case.  He submits that whilst Williams’ Trustee was applied by the Court of Appeal in Ip Cheung Kwok v Sin Hua Bank Trustee Ltd [1990] 2 HKLR 499, the uncertainty problem with the identification of Welsh people in Williams’ Trustee does not appear in the present case. He argues that Hakka people can be more readily identified and defined. Nor did any uncertainty issue arise in the Ip Cheung Kwok case which involved the settlor’s clansmen sharing the same surname residing in the same village.  At least, Mr Chan submits, whether Hakka people can be closely defined should be a matter for further investigation at trial.

25. I do not believe this distinction can assist the plaintiffs. It is of little relevant as the problem of finding a community here is not about uncertainty of its members.  It arises out of the lack of any territorial confinement of its members.

Third Requirement – Exclusively Charitable?

26. Now I come to the third requirement, i.e. exclusivity of charitable purposes.  The defence contends that the objects of the Association are clearly not exclusively charitable even if some of its objects are charitable in nature.

27. The general principles relating to the exclusivity requirement are not in dispute.  Ms Wong pertinently refers to me the following summary of the settled principles made by Lord Cohen in IRC v City of Glasgow Police Athletic Association [1953] AC 380 at p.405:

“(1) If the main purposes of the body of persons is charitable and the only elements in its constitution and operations which are non-charitable are merely incidental to that main purpose, that body of persons is a charity notwithstanding the presence of those elements;

(2) If, however, a non-charitable object is itself one of the purposes of the body of persons and is not merely incidental to the charitable purpose, the body of persons is not a body of persons formed for charitable purposes only within the meaning of Income Tax Acts;

(3)  If a substantial part of the objects of the body of persons is to benefit its own members, the body of persons is not established for charitable purposes only.”

28. Before I consider the Objects Clauses, I have to deal with an argument of Mr Chan.  He invites this court to look beyond the MA. He submits that as stated in Clause 3(a), the first object is to take over the management and assets of the unincorporated association known as “Tsung Tsin Association” (香港崇正總會) (“the Unincorporated Association”).  It must follow that the stated objects of its predecessor in its written constitution (“the Constitution”) should be considered as well.

29. Despite Ms Wong’s objection, I accept that at this stage it is arguable that by taking over the management and assets of the Unincorporated Association, the Association also pursues the objects of the Unincorporated Association and so they are relevant to the examination of the objects of the Association.

30. Clause 3 of the Constitution of the Unincorporated Association provided as follows:

“聯絡國內各地，及海外各埠、同系人士, 交換智識, 振興工商事業，興辦學校， 共謀公益，攷證源流，互助同人為宗旨.”

31. This provision does not really assist the plaintiffs in my judgment for two reasons.  First, even assuming the objects stated are exclusively charitable, it cannot alter the nature of the allegedly non-charitable nature of those offending provisions in the current MA.  The Association, whilst taking over the charity trust in the Unincorporated Association, can of course pursue other non-charitable objects if so allowed under its MA.  The plaintiffs thus cannot pray in aid this provision to assert exclusivity of its current charitable purposes. 

32. Moreover, this provision suffers from the same problem in that the Hakka people residing locally and Mainland and all other cities abroad cannot possibly constitute a sufficiently identifiable community. 

33. Mr Chan further submits that the factual background of the formation of the Unincorporated Association and also the nature of properties and assets should be taken into account.  I disagree.  I fail to see and the plaintiffs fail to persuade me why the construction of the said provision calls for extrinsic evidence to be adduced by way of factual matrix.  I am of the view that these matters are irrelevant and only tend to complicate the specific issue in the application.

34. Returning to the Objects Clauses of the MA, it is necessary for me, for ease of reference, to set out all the provisions as follows:

“3. The objects for which the Association is established are:-

(a) To take over the management and assets of the unincorporated association known as “Tsung Tsin Association” (香港崇正總會).

(b) To promote and protect the industrial, commercial and other lawful interests of Hakka Community resident in the Colony of Hong Kong, China and abroad (hereinafter referred to as “the Hakka people”).

(c) To consider, investigate into and study all questions connected with the said interests.

(d) To promote, support or oppose legislative or other measures affecting the said interests.

(e) To explain and expound the laws and regulations of the Colony of Hong Kong for the information of the Hakka people.

(f) To make representation to Government or any of its departments on any question or matter affecting the Hakka people.

(g) To act as arbitrator and to undertake arbitration for the settlement of disputes between the Hakka people.

(h) To collect and circulate statistics and other information relating to the Hakka people and their interests.

(i) To establish, superintend, administer and contribute to any benevolent fund from which donations or advances may be made of scholarship be awarded to deserving persons who may be engaged in educational pursuits, and to contribute to or otherwise assist any charitable institutions or undertakings.

(j) To advance and promote leaning and education and to grant scholarships and prizes.

(k) To establish and carry on one or more non-profit making schools or colleges, where students may obtain a sound technical, professional or general education.

(1) To establish, promote and maintain libraries and reading and writing rooms, and to furnish the same with books, reviews, magazines, newspapers, recordings and other publications.

(m) To provide for the delivery and holding of lectures, exhibitions, film and musical performances, public meetings, classes and conferences calculated directly or indirectly to advance the cause of education, whether general professional or technical.

(n) To accept donations and endowments for all or any of the purposes herein provided and to support establishments and institutions for any of such purposes.

(o) To act as custodian, trustee or manager of any property of fund for any chartitable or other organisations or institutions.

(P) To undertake and execute any trusts which the Association may be requested so to do provided the Association consider the undertaking thereof is desirable, either gratuitously or otherwise.

(q) Subject to the provisions of Section 17 of the Companies Ordinance to purchase, take on lease or in exchange, hire or otherwise acquire any real or personal property, and any rights or privileges, which the Association may think necessary or convenient for the purposes of the Association.

(r) For the purposes of the Association to advance and lend money on the security of land, buildings, hereditaments and premises of any tenure or description, shares, securities, and other property in the Colony of Hong Kong.

(s) To sell, improve, manage, develop, lease, mortgage, dispose of or otherwise deal with all or any part of the property of the Association.

(t) For the purposes of the Association to borrow, raise or secure the payment of money in such manner as the Association shall think fit, and in particular by the issue of debentures, perpetual or otherwise, charged upon all or any of the Association’s property (both present and future), and to purchase, redeem or pay off any such securities for the re-building or increase of the Association’s property.

(u) To receive money on deposit, with or without allowance of interest thereon.

(v) To issue certificates of origin of any goods and to undertake and conduct surveys of any goods or merchandise, and to issue all necessary certificates in connection therewith.

(w) To raise money by subscription or other lawful means for the purpose of the above objects or any of them.

(x) To support and subscribe to any charity, relief or public fund in the Colony of Hong Kong or elsewhere and to make donations to such persons or institutions and in such cases or circumstances as the Association shall think fit.

(y) To do all or any of the above things as principal, agent, contractor, trustee or otherwise, and by or through trustees, agents or otherwise, and either alone or in conjunction with others.

(z) To do all such other things as are incidental or conducive to the attainment of the above objects, and so that the word “company” in this Clause shall be deemed to include any partnership or other body of persons, whether incorporated or no incorporated, and wheresoever domiciled, and so that the objects specified in each paragraph of this Clause shall, except when otherwise expressed in such paragraph, be in nowise limited or restricted by reference to or inference from the terms of any other paragraph.”

35. Ms Wong submits that in Clause 3(b), in its promotion and protection of “other lawful interests of the Hakka Community”, the Association, albeit beneficial to the Hakka Community, is not charitable or at least not exclusively charitable in nature.  Promotion and protection of other lawful interests of the Hakka Community are too wide in scope and can include purposes which are not charitable: Ip Cheung Kwok per Clough JA at p.547C-E. 

36. In reply to this forceful submission, Mr Chan makes an interesting submission on Clause 3(b).  He relies on In re Town and Country Planning Act 1947, Crystal Palace Trustees v Minister of Town and Country Planning [1951] Ch 132 to support his contention that promotion and protection of industrial and commercial interests could be accepted as a charitable objective.  In that case, Danckwerts J upheld as charitable a trust for the promotion of industry, commerce and art.

37. Then he goes on to submit that the phrase “other lawful interests of Hakka Community resident (sic) in the Colony of Hong Kong, China and abroad” following the phrase “To promote and protect industrial, commercial” (the two phrases being connected by the conjunction “and”) must be limited to interests ejusdem generis with those specifically mentioned before, i.e. industrial and commercial interests.  It follows, Mr Chan argues, that the Association’s intended protection of other lawful interests of Hakka Community is also a charitable objective.

38. I am not persuaded by this submission and I do not accept that this clause can be amenable to such a construction.  Though I note that the finding of Danckwerts J in the Crystal Palace Trustees case turned on the true construction of the wording of the Crystal Palace Act 1914, which has no application to these proceedings, I accept at this stage that the promotion of industry and commerce for the public benefit may be held as charitable: Picarda QC, The Law and Practice Relating to Charities, 4^th edition, pp.218-220.

39. However, I am of the view that for the purpose of a true and fair construction of Clause 3(b), the discernible common characteristic of industrial and commercial interests is that they are both examples of lawful interests.  I do not accept that “other lawful interests” referred subsequent thereto should be construed to include any interests similar to both industrial and commercial interests other than being equally lawful.  In other words, so long as such interests are lawful in nature, as with industrial and commercial interests, they would fall within the ambit of Clause 3(b).

40. To reinforce her argument, Ms Wong draws my attention to certain offending provisions immediately following Clause 3(b), namely, Clauses 3(c), (d), (e), (f), (g) and (h).  In such provisions, apart from Clause 3(a) and (e), I accept that they cannot be possibly regarded as charitable objectives.

41. Other offending provisions include Clauses 3(k), (m), (n), (o), (p), (q), (r), (s), (t), (u), (v), (w), (x), (y) and (z).  The discretionary element in Clauses 3(p), (q) and (x) further negatives exclusivity of charitable purposes of the Association: see Keren’s case per Lord Hanworth at pp.479-4780 and Lawrence LJ at p.482 and Oxford Group v IRC [1949] 2 All ER 537 per Cohen LJ at 544H -545F.

42. It is submitted on behalf of the plaintiffs that any such allegedly offending provisions may merely be an ancillary ‘object’ or ‘power’ to facilitate the main object if such objects or power is just a mean but not an end.  In this regard, the plaintiffs refer me to the dicta of Slade LJ in Rolled Steel Products (Holding) Ltd. v British Steel Corporation and Ors [1986] Ch.246 at pp. 288H-289B.

43. To start with, whilst I at this stage accept that it is arguable that certain objects of the Association are charitable, I do not accept the foregoing offending provisions are merely ancillary to such objects.  The plaintiffs did not begin to persuade me how they are so by way of evidence or submissions.

44. Ms Wong further prays in aid Clause 3(z), which provides each objects of the Objects Clauses shall be construed independently except otherwise specified.  I accept her submission and find that it is not arguable that the foregoing offending provisions save Clauses 3(n), (w), (y) and (z) are merely ancillary to other objects stated in the Objects Clauses.

45. Ms Wong on the other hand urges this court to consider the actual activities carried on by the Association to ascertain the objects of the Association.  This unusual course was approved by Lightman J in Inland Revenue Commissioners v Oldham Training and Enterprise Council [1996] STC 1218.  At p.1234, Lightman J said this,

“To ascertain the objects of an institution such as Oldham TEC, where the objects are comprehensively set out in a document, it is necessary to refer to that document (in this case the memorandum of association) and to that alone, It is irrelevant to inquire into the motives of the founders or how they contemplated or intended that Oldham TEC should operate or how it has in fact operated. To determine whether the object, the scope of which has been ascertained by due process of construction, is a charitable purpose, it may be necessary to have regard to evidence to discover the consequences of pursuing that object … What the body has done in pursuance of its objects may afford graphic evidence of the potential consequences of the pursuit of its objects”

46. In the present case, under Clause 3(b), one of the Association’s express objectives is to promote and protect “other lawful interests of the Hakka Community residents in Hong Kong or elsewhere”.  However, such lawful interests are not identified.  I accept that it is permissible to look at the actual activities to see how the promotion and protection of such lawful interests are carried out in accordance with the Association’s objects.

47. In this regard, Ms Wong highlights many seemingly non-charitable activities including many celebratory functions and entertainment events.  Worthy of note are its involvements in the many political activities as disclosed by the Affirmation of Wong Jing (the 1^st defendant).  Such activities are not denied by the plaintiffs and they include the Association’s sponsorship of Kuomingtang activities in Taiwan and various peaceful Taiwan-PRC unification campaigns.  The Association also made submissions to the HKSAR Government in respect of the reform package and posted advertisements on newspaper in support thereof.

48. These political activities cannot be said to be charitable in nature: Picarda QC, The Law and Practice Relating to Charities, 4^th edition, pp.225-226.  The plaintiffs do not argue otherwise.  I do not accept that they were carried out to attain any of their charitable objectives.

49. By reading the MA and looking at the actual activities carried out in pursuance thereto, I am of the firm view that the Association falls foul with the exclusivity requirement.

50. By reason of the foregoing matters, I therefore come to the conclusion that it is plain and obvious that the Association cannot be a public charity.  It clearly fails to fulfil both the 2^nd and 3^rd requirements.  The present action in light of the present constitution of the Association is doomed to failure.  It is both frivolous and vexatious.  It is also an abuse of the court process for the plaintiffs to pursue such a hopeless case.  I strike out the OS on these grounds.

51. I should add that Mr Chan once suggests leave to be granted to the plaintiffs to amend the OS.  He does not explain what the proposed amendments are nevertheless.  The OS was taken out wholly on the legal basis that the Association is a charity and seeks to invoke this court’s supervisory jurisdiction over charities.  In light of my conclusion that the Association is not a charity, I do not think the OS is amenable to amendments and it appears to me that it is an appropriate case to strike the OS out in its entirety.

52. Given this conclusion, it is not really necessary to deal with other grounds advanced by the defence and other contentions of the plaintiffs.  For completeness, I shall briefly deal with the following matters.

Abuse of Court Process

53. The defendants draw my attention to the two other actions (HCA 4389/2003 and HCMP 1856/2004). Both of them were commenced more than 10 years ago.  The same question as to whether the Association is a public charity is raised in the two actions but they have simply been warehoused.

54. In addition, it was pointed out by the Inland Revenue Department to the Association that substantial amendments were required to be made to the MA and AA so that the Association could qualify for tax exemption as a charity.  Such amendments require a special resolution.  The Association has not procured such a special resolution to be passed and indeed there was a resolution to defer the intended application for the status of a charity.

55. Against this background, the defendants claim that the present action is an abuse of the court process.

56. However, such an inference should not be lightly drawn and on the evidence I am unable to accept that there is an abuse.  The said two actions involve different persons and the plaintiffs here are entitled to resolve their legal issues in the way most expedient to them.  If this court is persuaded that the Association is to all intents and purposes a public charity and should in law enjoy such a status, arguably the opposing view of its members is irrelevant. 

Misjoinder?

57. The defendants were joined because they were elected members of the 36^th Executive Committee in 2007 for a term of three years.  The defence argues that their office expired in 2010 and absent re-election they are no longer members of the 36^th Executive Committee.  Furthermore, they contend that the plaintiffs seek no relief against them personally.  Thus, it is argued that there is a misjoinder and the OS as against them should be struck out on this basis.

58. If I allow the OS to proceed, it must be on the basis that the Association could be adjudicated to be a public charity.  I would not strike out the OS against the defendants as I do not accept that they were improperly joined.

59. First, I accept Mr Chan’s submission that they stand as trustees of the Association and remain so until the court orders otherwise or re-appointment of new trustees in their place.

60. Second, I also accept Mr Chan’s submission that the defendants being the members of the Association have an interest in these proceedings and they are proper defendants.  They have never indicated that they do not wish to contest these proceedings and are willing to be bound by the adjudication of the OS.  Quite on the contrary, the defendants oppose these proceedings.  In my view, they cannot be heard to complain that they were improperly joined.

New Approach?

61. At the hearing, Mr Chan refers me to the Court of Appeal decision in Secretary for Justice v Joseph Lo Kin Ching & Ors., unreported, CACV 44/2013, 11.4.2014, which concerned the well-known will of Nina Wang.  Mr Chan impresses me that this recent judgement has indeed broken new grounds and may have revolutionary impact on the present case.

62. For the present purpose, I need not go into detail of the facts of that case.  The long and the short of it is that the Court of Appeal was agreeable to the suggestion that those non-charitable trust powers given to the trustees of a charitable trust could be excised so that the remaining part of the charitable trust could still be operated in accordance with the wish of the testator.

63. Mr Chan urges this court to adopt a similar approach in this case.  He submits that those non-charitable objects in the MA can be removed from the Objects Clauses so that the Association can fulfil the exclusivity requirement of a charity.  I cannot agree with him.

64. Obviously, the facts of that case bear no resemblance to that of the present case despite the fact that the plaintiffs also ask for an order that the Association be administered by a scheme.  This court faces a wholly different question here and is not called upon to implement a charitable trust intended by the settlor.  I do not think the course suggested by Mr Chan is open to me at all.  Whilst it tends to provide an easy and ready solution to the long-established exclusivity requirement, I fail to see the legal basis upon which and the reason why this court can delete certain objects from the MA and impose on the Association a change of its nature against the wish of some of its members including the defendants. 

R & M Summons

65. I now turn to the plaintiffs’ application for appointment of interim receiverships and managers pursuant to Order 30 rule 1, RHC.  Mr Chan contends that even if the OS is struck out, this court could still appoint receivers and managers pursuant to section 21L of the High Court Ordinance and the only consideration is whether it is just or convenient to do so.

66. I, however, do not think that after the OS is struck out, in the absence of a new action, this court should grant such interim relief sought upon a free-standing application.  I proceed to consider this application on the basis that the OS should not be struck out.

67. Mr Chan helpfully refers this court to the relevant principles expounded by Kwan J (as she then was) in Re Zealot & Co Ltd [2008] 1 HKLRD 386 at §30:

“The principles for the appointment of interim receivers are well established. I apply by analogy the principles for granting interlocutory injunctions in American Cyanamid Co v Ethicon Ltd [1975] AC 396. I need to consider if there is a serious case to be tried, if there is proper basis for appointing receivers such as a jeopardy to assets, and where the balance of convenience lie.”

68. Ms Wong draws my attention to another paragraph of the judgement where the learned judge said this:

“There are four questions I need to consider:

(1) If there is a risk of dissipation of assets;

(2) If some form of interim protection should be given to preserve the status quo;

(3) If it is necessary to appoint receivers or whether some other less invasive form of protection would suffice; and

(4)  If (the applicant) is able to provide an undertaking as to damages suitably fortified.”

69. With these principles in mind, I turn to the plaintiffs’ application.  First, I consider whether there is a real risk of dissipation of the assets of the Association as a result of the apparent deadlock of its management.  It is alleged that no meeting has ever been convened and no resolution has ever been passed after the dissolution of the 36^th Executive and Supervisory Committee and the affairs of the Association are in a limbo.

70. In this respect, the evidence of the plaintiffs is that the asset allegedly in jeopardy is the rental income yielded from the property of the Association situated at Tsun Tsin Building.  It is alleged that its tenant Bright Team Development Ltd  (“Bright Team”) has failed to pay rent from June 2011 to November 2011 (resuming rent payment afterwards) and the total arrears for that few months amount to HK$3.25 million.

71. Next, the plaintiffs complain that Bright Team is suspected to have agreed with a third party without the consent of the Association to sub-let part of the leased property.  There is a letter dated 30 April 2012 sent by the Association to Bright Team setting out its complaint.

72. Further, the plaintiffs complain that the two tenancies relating to the property of the Association situated at South Wall Road expired in late 2013 but no one would deal with the termination and/or renewal of the tenancies.

73. Lastly, the plaintiffs rely on the fact that the Association may be sued by Convey Advertising Company Limted (“Convey”) for breach of an agency agreement whereby Convey was granted the sole and exclusive right to lease certain part of the external wall of Tsung Tsin Building on behalf of the Association.  The first complaint letter sent by Convey’s solicitors to the Association was dated 5 December 2011.

74. Ms Wong submits that the management problem is exaggerated and indeed the audited accounts for 2013 was approved by the members at an EGM held on 15 March 2014.  The plaintiffs say that it was approved just because there was not much controversy involved.

75. It can thus be seen that the Association is still able to manage its own affairs and handle less controversial matters.  The fact that it has difficulties in dealing with controversial issues provides no justification for the court to interfere with its operation by way of the grant of invasive remedies. 

76. Ms Wong submits that all the complaints made by the plaintiffs in support of the application lack urgency.  I agree.

77. Mr Chan argues that the prime consideration should be whether it is just or convenient to make the appointment and the lack of urgency plays little part.  I cannot accept this submission. Lack of urgency and the fact that there has been unexplained delay for the plaintiffs to take action should be relevant considerations in the balance.

78. Overall speaking, I am not impressive by the plaintiffs’ evidence.  I am not convinced that any of the plaintiffs’ assets are in jeopardy.  The arrears of rent owed by Bright Team should be recovered by a legal action and not by the appointment of a receiver.  There is no reason why the Association has not at the very least issued a protective writ against the defaulting tenant. Indeed, the evidence relating to all other complaints lacks cogency.  Coupled with the unexplained delay in taking any steps to preserve its assets against alleged risks of dissipation, I see no reason why this court should allow the Association such invasive remedies, particularly given their substantial costs (hourly rates of JKKY exceeding HK$6,000).  There is no evidence that the plaintiffs are able to provide an undertaking as to damages. In the circumstances, I without hesitation refuse their application.

Conclusion and Order

79. For the reasons given above, I accede to the defendants’ application by way of the Striking out Summons and I make an order that the OS be struck out with the defendants’ costs of this action including this application be borne by the plaintiffs on the usual basis.  I am aware that the defendants ask for indemnity costs in their Striking out Summons.  At this stage suffice it for me to say that I am not sufficiently convinced.

80. I further dismiss the R & M Summons with costs to the defendants again on the usual basis.

81. The plaintiffs should also pay costs of this action including these two summonses to the 13^th defendant.  As regards the 8^th defendant and the Association, I make an order that they do bear their own costs.

82. All the foregoing costs orders made are on nisi basis, subject to variation upon application by summons to be taken out within 14 days from the date of this Decision.

83. Lastly, I thank leading counsel and their junior counsel on both sides for their thorough and meticulous submissions and able assistance in this matter.