SHUM CHOI SANG AND OTHERS v. SECRETARY FOR JUSTICE AND ANOTHER

HCMP 140/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 140 OF 2009

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J U D G M E N T

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1.  The Confucian Society [“the Society”] was established in the first decade of the last century with a Mr Lau Chu Pak as its first chairman.  It was an unincorporated body.  It remains to be so and it has been registered under the Societies Ordinance.

2.  According to its written constitution, one of the objectives of the Society is to set up and operate schools to provide free education for the poor.  One of the schools previously operated by the Society was a primary school [“the School”] at No. 12 School Street, Tai Hang, Causeway Bay, also known as Tai Hang Inland Lot No.161 [“the Land”].  It had been founded in 1911.  The School was destroyed during Japanese occupation of Hong Kong in the Second World War.

3.  After the war, with donations from local people, the School was rebuilt in 1949.  The rebuilding was commemorated by a stone carving which can still be found at one side of the building.  The School resumed its operation since May 1950.  A few years later, it became a government subsidized school. 

4.  Due to the shortage of students, the School suspended its operation in 1978.  Five years later, the Land was leased to Ms Ting Yuk Chee for the operation of another school called Confucian Society Victoria English Primary School.  The Society collected rent from Ms Ting.

5.  That school also ceased operation in 1999.  Due to the constraint in space, the building is no longer suitable for operation of a primary school.  The Society continued to lease the Land to Ms Ting.  The latest lease is from 2007 to 2010.  It provided that the Land would be used for the purpose of propounding the doctrine of Confucius and development of Chinese culture.

6.  As stated in counsel’s written submissions, the purposes of the present proceedings are two-folded,

(a) To vest the title of the Land in a legal entity to hold the same as trustee;

(b)    To dissolve the Society and let another entity to take over its properties and affairs.

The trust in respect of the Land and the identity of the trustee

7.  It is necessary to examine further the history as to the ownership of the Land and the nature of the trust on which the Land is being held before one deals with the question who should be the trustee.

8.  By a Crown Lease dated 26 December 1908, the Land was granted to Chu Hung Tsun and Diu Jan Wan as trustees for Tai Hang School.  The lessees were not required to pay any premium and a yearly rent of $12 was the only monetary consideration.  The Crown Lease contained a covenant by the lessees (binding on their successors in title) that the Land would not be used for any purpose other than a school.

9.  We have no information as to what happened to the Tai Hang School.  On the evidence before the court, it would appear that after the Land was acquired, a building was erected on the Land at the cost of the Society.  On 17 February 1911, the Land was assigned by the Crown lessees to Lau Chu Pak.  The assignment was not produced to this court.  Instead I have before me a memorial of that assignment.  Based on the recitals in the assignment as recorded in the memorial, Mr Lau acted as the chairman of the Society in the matter and the Society agreed to undertake the conduct of a school in the building erected on the Land.  On that basis, the Crown lessees and the inhabitants of Tai Hang agreed to transfer the Land to Mr Lau with a covenant [“the Covenant”] as follows,

“…if the Confucian Society failed ceased or discontinued to carry on the work of conducting a school or propound the doctrine of Confucius, [the assignee] would at the cost and expense of the assignors reassign the premises to the assignors or their successors the Trustees for the time being for the Tai Hang School upon repayment by the Trustees for the time being of [the costs of construction of the building in the sum of $324.37] …”

10.  The factual matrix indicated that the Land was not assigned to Mr Lau beneficially.  Further, I do not think it was assigned to Mr Lau to hold on trust for the Society absolutely.  Rather, it was assigned with a specified purpose, viz. to have a school operated there.

11.  This would be in line with the terms in the Crown Lease.  The Land was first granted by the Crown to Chu and Diu as trustees for Tai Hang School.  Since the school was not a legal entity, the title had to be held by Chu and Diu.  In other words, Chu and Diu were not the beneficial owners.  They were holding the title on trust.  But on trust for whom?

12.  On its face, the Crown Lease stated that Chu and Diu held the title on trust for Tai Hang School.  Due to the lapse of time, I do not have much information about Tai Hang School.  It was apparently not an incorporated body.  Further, given that the costs of construction of the building had to be paid by the Society and there was no reference to any governing body of the Tai Hang School in the 1911 Assignment, a reasonable inference is that Tai Hang School had never come into existence.

13.  That assignment recited a meeting of the inhabitants of Tai Hang on 1 November 1909 approving of the transfer of the Land to Lau.  The Crown Lease stipulated that the Land could only be used for the purpose of a school.  The name Tai Hang School and the location of the Land suggested the purpose under the Crown Lease was to establish a school for public education at the locality of Tai Hang.

14.  I therefore conclude that before the 1911 Assignment, Chu and Diu held the Land on trust for a charitable purpose, namely to establish a school for public education on the Land.  The original plan was to set up a school called the Tai Hang School.  But the plan did not materialize.  Since the charitable purpose was clear, it could operate as trust for a charitable purpose (see Tudor on Charities, 9^th Edn, para. 11-015).

15.  Mr Suen contended that the 1911 Assignment was in effect a vesting of the Land from one charitable trust/purpose (Tai Hang School) to another charitable trust/purpose (the Society) under the cy-pres principles.  I do not accept this argument.  Had it been the intention of Chu and Diu to give the Land to the Society absolutely, there would not be any need to have the Covenant in the 1911 Assignment.  Further, as discussed, Chu and Diu were not free to dispose of the Land as they wished.  They only held the Land as trustees under a charitable purpose trust.  The Land was assigned to Lau with the Covenant to ensure that the same charitable purpose, viz. operating a school for public education there, could be achieved.

16.  Thus, after the 1911 Assignment, Lau held the Land as trustee for the charitable purpose of setting up and operating a school for public education thereat.

17.  The Society had been using the Land for that purpose until 1978.

Future management of the Land and the administration of the trust

18.  Between 1978 and now, the Land was leased out to Ms Ting initially to run a school and later an educational centre for propounding the doctrine of Confucius or promotion of Chinese culture.  The Society has been labouring under the notion that it owns the Land absolutely.

19.  With the clarification of the true nature of the ownership of the Land and the character of the trust, there is a need to place the management of the Land and the administration of the trust on proper footing.

20.  I accept the submission of Mr Suen that Lau must have passed away.  Hence, there is a need to appoint someone else as the trustee.  I further agree that due to the past irregularities in the internal organization of the Society and the intention of the office bearers to dissolve the Society, it would be better to appoint a corporate body as the trustee.

21.  Amongst the two corporate bodies proposed, I am of the view that the Confucian Hall of Hong Kong Limited would be the more appropriate candidate.  I understand from Mr Wong that the Secretary for Justice has no objection to such appointment.

22.  However, before formally vesting the title of the Land to the new trustee, I think it is necessary to have a scheme in place so that everybody knows how the Land should be used in accordance with the terms of the charitable trust.

23.  A cy-pres scheme is necessary because I was told that the Land could no longer be used for the purpose of a school for public education.  However, it could be used for the purpose of some community educational purposes which have to be in line with the charitable status of the trust.  The scheme has to be approved by the court and the Secretary for Justice can comment on the same.

24.  I therefore direct the Applicants to submit a scheme to the Secretary for Justice for comment within 30 days.  The Secretary shall file and serve his comments within 14 days thereafter.  If the matter is non-contentious, the court may dispose of the matter on papers.

Dissolution of the Society

25.  As regards the dissolution of the Society, whilst the court does have inherent jurisdiction to make an order for its dissolution (see In re Lead Company’s Workmen’s Fund Society [1904] 2 Ch 196, Re William Denby & Sons Ltd Sick and Benevolent Fund [1971] 1 WLR 973 at p. 978-9), the Society can also be dissolved by other means (see Re William Denby & Sons Ltd Sick and Benevolent Fund, ibid. and Hong Kong Kam Lan Koon Ltd v Realray Investments Ltd (No 3)  [2005] 3 HKC 60).

26.  A court order dissolving an unincorporated association is a draconian measure.  In the present context, I see no reason why the matter should not be left in the hands of members of the Society.  As a matter of principle, I do not see any reason why the court cannot, instead of making an order for dissolution, exercise its inherent jurisdiction by directing a meeting of the Society to be held for the purpose of winding up its affairs.  In re Lead Company’s Workmen’s Fund Society [1904] 2 Ch 196 at p. 204, Warrington J held that the court has jurisdiction to interpose in dealing with properties held in the name of unincorporated association and I do not think His Lordship was confining to a simple order for the dissolution of the society.  The approach I now adopt also seems to be in line with that of the Lord Chancellor in the case of Pearce v Piper (1809) 17 Ves 1, discussed by Warrington J. at p. 205-6.

27.  I will therefore give directions for convening a meeting of the Society in terms of paragraphs 4 to 6 of the draft submitted by the solicitors for the Applicants.

Declaration of charitable status of the Society

28.  The two purposes identified by counsel can be achieved without a consideration of the charitable status of the Society.  Though there is a prayer for a declaration of charitable status in the Originating Summons, as a matter of discretion I am not minded to decide that question in this judgment.  First, the Applicants have not shown it is necessary to do so.  Second, there is no suggestion that the Society has been registered as a charity body with the Inland Revenue Department.  Thus, I would require more evidence of the recent activities of the Society and the participants thereof and how the Society’s funds have been used before I can be satisfied that a declaration to such effect should be granted.

29.  Lastly, I shall make an order for costs in accordance with paragraphs 7 and 8 of the draft order.