SAM SHUI NATIVES ASSOCIATION v. KWOK WAI CHIU AND OTHERS

CACV 362/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 362 OF 2007

(ON APPEAL FROM HCMP NO. 4224 OF 1996 AND
HCMP NO. 1384 OF 2000 (CONSOLIDATED))

 HCMP 4224/1996

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(CONSOLIDATED PURSUANT TO THE ORDER OF
MASTER POON DATED 11 SEPTEMBER 2000)

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J U D G M E N T

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Hon. Yeung JA:

1.  I agree with the judgment of Yuen JA and have nothing to add.

Hon Yuen JA:

2.  This is an appeal from the judgment of Chung J given on 3 August 2007 dismissing the Plaintiff’s claims of ownership of four properties. 

3.  The facts of this case go back 120 years.  The proceedings are concerned with the title to 4 properties acquired between 1888 and 1948 on 3 occasions:

Properties (A) (acquired 20 July 1888)
-	No.19 - 20 (formerly No.20-21) U (or Yu) Lok Lane
	(I.L. 681, Section A, Subsection 4 and
	(I.L. 681, Section B, Subsection 2);
Property (B) (acquired 4 July 1928)
-	No.110 Queen’s Road West
	(I.L. 762, Section A, Subsection 1),
Property (C) (acquired 30 November 1948)
-	No.18 U Lok Lane.
	(I.L. 681, Section A, Subsection 3).

4.  Evidence has been adduced in the form of affirmations from the Plaintiff, some exhibiting documents written decades ago by persons who have since died.  No questions have been raised about the authenticity of the evidence or the integrity of the persons involved.  Accordingly although there are gaps in the evidence, I have sought to bring together the various strands of evidence and to consider them in as consistent a way as possible.

Background

5.  A historical account of the relevant facts can be found in an article written by Tang Cheuk Wan (鄧倬雲) contained in the inaugural edition (創刋號) of the Sam Shui Monthly (三水月刋) published in 1940.

Yee Chung (義塚)

6.  During the first 20 years of Hong Kong’s colonization, many people from Sam Shui district in Guangdong, China came to Hong Kong en route to South East Asia to find work.  Some died in Hong Kong.  Sometime after 1875 (the start of the reign of the Emperor Guang Xu), there were 41 persons who had died but had not had proper burials.  Tang Cheuk Wan’s father who worked for the Hong Kong Government and a merchant also from Sam Shui persuaded the Government to give them plots in Sandy Bay to bury these 41 persons.  The graves were called Yee Chung (義塚).

Fund-raising for maintenance of Yee Chung and relief of the poor

7.  By 1888, the graves were badly in need of restoration.  Some gentlemen who were natives of Sam Shui got together to raise funds for the restoration of the graves (重修義塚) and to acquire a property with the intention that the income from the property would be used to defray expenses required for maintaining the graves and for regular memorial ceremonies (購置嘗產).  Surplus funds were to be used for the relief of poor persons from Sam Shui.

Acquisition of Properties A

8.  More than $1000 was raised.  The Yee Chung graves were restored and Properties A were acquired, for the purposes set out in the preceding paragraph, in the names of 8 persons (whose successors have been made the 4^th - 11^th Defendants in the earlier of the two sets of present proceedings).  These 8 persons acquired the property as tenants-in-common.  Subsequently a Declaration of Trust was executed by 3 of these 8 persons which I will refer to later in this judgment.

Dun Yee Tong (敦義堂)

9.  An unincorporated association called the Dun Yee Tong (敦義堂) was set up with directors elected annually to manage its affairs.  Although Tang Cheuk Wan’s article did not expressly connect the Dun Yee Tong to the Yee Chung and the acquisition of Properties A, it may be inferred from the reference to the Dun Yee Tong in the context of his historical account that this association was set up to raise and administer funds for the restoration and maintenance of the Yee Chung and the relief of the poor.

Beneficial interest in Properties A

10.  Pausing here, it will be noted that Tang Cheuk Wan’s historical account named the persons involved in the fund-raising activities but did not identify the donors.  It may be inferred from this that the donors intended to part with their money out-and-out absolutely in all circumstances, preventing a resulting trust from arising (Lewin on Trusts 18^th ed, para. 8-68).

11.  As far as the beneficial interest in Properties A was concerned, subject to the formality of a written declaration of trust, the use of the income for the maintenance of graves may amount to a trust of imperfect obligation (Lewin, para. 4-42).  And the use of surplus funds for the relief of the poor would amount to a valid charitable purpose, even if it was only for the benefit of a particular group from a specific geographical area (Tudor on Charities 9^th ed. p.10).  As a trust of imperfect obligation requires residuary legatees to enforce it, the charitable purpose of the relief of the poor would perform that function.

Seung Kung Mo Kuk (商工務局)

12.  In 1911 after the establishment of the Republic of China, some natives of Sam Shui in Hong Kong wished to establish an organization to promote business interests and to foster closer ties among people from that district.

13.  They first considered calling the organization Sam Shui Seung Wui (三水商會 or Sam Shui Commerce Association), but taking into account that some members were not involved in commerce but in industry and also possible connotations surrounding the word “Wui” (會), it was decided to name the organization Seung Kung Mo Kuk (商工務局 or Bureau of Commerce and Industry).

Dun Yee Tong merger

14.  The relevance to these proceedings is that the Dun Yee Tong merged with this organization when it was formed in 1911.  The new organization Seung Kung Mo Kuk was an unincorporated association, as it fits the description of “a body of two or more persons bound together for common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organization which has rules which identify in whom control of it and its funds rest and upon what terms and which can be joined or left at will” (Lewin para. 4-49).

Purposes A and B (Non-charitable and charitable)

15.  The Seung Kung Mo Kuk had written purposes and rules (exhibited as LCK-1).  Whereas previously the purpose of the Dun Yee Tong was for the maintenance of the Yee Chung and relief of the poor, the Seung Kung Mo Kuk was established for two purposes

  (本局建設宗旨) (LCK-1, p.421): 

(甲)   為保護旅港三水縣人之商工事業並各項利益及聯絡同鄉同業互相協互相提携同鄉中商工各業日臻發達

(A) (essentially, the promotion of business interests of and fostering ties among Sam Shui people in Hong Kong)  (“Purpose A”) and  

(乙)   有關於本邑公益慈善等事本局權力可及並無違背法律者得盡力維持興辦

(B) (the maintenance and promotion of public benefit and charitable acts) (“Purpose B”). The relief of the poor from surplus funds left after the maintenance of the Yee Chung fell within this purpose. 

In other words, the Seung Kung Mo Kuk had both non-charitable and charitable purposes – (A) the non-charitable purpose of promoting commerce and industry and social ties, and (B) the charitable purpose of maintaining and promoting charitable acts, which included the Dun Yee Tong’s activities for the relief of the poor.

Property holding of a non-charitable unincorporated association

16.  Pausing here, it may be helpful to remind ourselves about the law where a non-charitable unincorporated association is involved in holding property.   The learned editors of Lewin have summarized the position as follows: “in general terms, there are three possible constructions of a gift to ... an unincorporated association” (for “gift to” an unincorporated association, one may read the “acquisition or holding of property by” an unincorporated association).  One possible construction (the second in Lewin’s analysis) is that the property is acquired by the members subject to the contract between them, in which case it does not fail as an object trust nor will it fail in perpetuity (para. 4-51):

“... the gift may be construed as a gift to the members of the association at the date of the gift, not as joint tenants, but subject to their contractual rights and liabilities towards one another as members of the association.  In such a case a member cannot sever his share.  It will accrue to the other members on his death or resignation, even though such members include persons who become members after the gift takes effect.  This construction is compatible with an intention that the gift would enure for the benefit of the association itself or its purposes, in view of the contract binding the members.  It is likely to be adopted where there is a gift simply to a named association ... If this ... construction is the true construction of the gift, then, as it is to the individual members of the association, it will not fail as an object trust.  Nor will it fail for perpetuity unless there is something in its terms or in the rules of the association which precludes the members at any given time from dividing the subject of the gift between them on the footing that they are solely entitled to it in equity”.  (Emphasis added).  

17.  As mentioned earlier, the Seung Kung Mo Kuk had rules governing the members’ contractual rights and liabilities (LCK-1).  Significantly rule 14 provided

「十四. 局員權利祗許本人獨有不得轉授別人如本人身故或因事除名其權利則同時止截 」

(“Members’ rights and benefits are enjoyed solely by themselves personally and are not transferable.  If [a member] dies or is expelled for cause, his rights will be terminated at the same time”).

This rule is consistent with the construction emphasized in italics in the preceding paragraph.  Further there was no rule precluding the members at any given time from dividing the property held by the association between them.  This is also consistent with the construction set out in the preceding paragraph.  Accordingly a holding of property for the non-charitable purposes of the unincorporated association Seung Kung Mo Kuk would not fail as an object trust nor for perpetuity.     

Declaration of Trust of Properties A

18.  Returning to the facts, within 2 years of the merger, 3 of the 8 tenants in common of Properties A executed a declaration of trust on 27 February 1913.  Of the other 5, 4 (with the exception of Chin Yee Tin 錢意田) were stated in the recital to have died.  There is no evidence to contradict this.  As for Chin Yee Tin, his name was not included in the recital as among those who had died, and his name in fact appears as the chairman of the Seung Kung Mo Kuk for the year 1919-1920 (己未--庚中) in the ledger exhibited as LCK-1 (p.432).  The contents of the declaration of trust are set out in the following paragraph.  It is not known why Chin Yee Tin did not sign the declaration of trust, but I do not think that discrepancy is significant.  As chairman of Seung Kung Mo Kuk, he must have been aware of the declaration of trust in its favour, the recital of which meant in effect that the tenants in common (including himself) had not provided the purchase price of Properties A.  Further no beneficial interest has ever been claimed by him or his successors.

19.  In the declaration of trust, it was recited that “the whole of the purchase money ... for [Properties A] was provided and paid by the Seung Kung Mo Kuk (商工務局) and Yee Chung (義塚) of the Sam Shui District” and the 3 tenants in common declared that they held Properties A “upon trust for all the members for the time being of the said Seung Kung Mo Kuk and Yee Chung of Sam Shui District aforesaid”.

20.  Now if these words in the recital and the declaration were read at face value, they would make no sense, as Seung Kung Mo Kuk did not come into existence until 1911, and the purchase money could not have been paid by the Yee Chung, as these were the graves of the 41 deceased persons at Sandy Bay.  However construing those words in the light of Tang Cheuk Wan’s historical account and in particular the Dun Yee Tong’s merger into Seung Kung Mo Kuk, the true meaning of those words is revealed – the purchase money for Properties A was provided by the donors for the Dun Yee Tong (which had since merged with and become known as the Seung Kung Mo Kuk) and the properties were held upon trust for the members for the time being of the Seung Kung Mo Kuk, Purpose B of which organization included the maintenance of the Yee Chung (with surplus funds for the relief of the poor).

21.  In my view, the effect of the Declaration of Trust could not have been to declare that the beneficial interest in Properties A was held by the Seung Kung Mo Kuk for all its purposes, including Purpose A - the promotion of business interests of and fostering ties among Sam Shui people in Hong Kong.  Given Tang Cheuk Wan’s historical account of the purposes of the fund-raising for Properties A, the tenants in common who executed the declaration of trust would have been in breach of trust had they declared a trust to that effect.  Such a finding should not be lightly made in the absence of evidence in support.  Further there was an express reference in the declaration of trust to the Yee Chung, which was obviously to restrict the use to which the Seung Kung Mo Kuk could put Properties A.  Accordingly it is clear in my view that the construction discussed in the preceding paragraph is the correct one. 

22.  As for the meaning of the words “for the time being”, it has been said that these words “are capable of different interpretations, according to the context” (per Kindersley VC in Ellison v Thomas (1862) 31 LJ Ch 867).  Given the rules of the Seung Kung Mo Kuk I have set out in para. 17 above, the definition given by Lord Nicholls in Department for Environment, Food and Rural Affairs v ASDA Stores Ltd [2004] 1 All ER 268 is apposite when he said “the phrase ‘for the time being’ envisages, and is intended to encompass, a changing state of affairs”.  In other words, Properties A were declared to be held on trust for the members of the Seung Kung Mo Kuk, subject to the contract between them set out in the rules, for the charitable purposes of the relief of the poor with surplus funds after the maintenance of the Yee Chung.  I shall return to the present situation later in this judgment.  

Acquisition of Property B

23.  According to Tang Cheuk Wan’s historical account, the Seung Kung Mo Kuk had to move its office several times as a result of the poor general economy in the 1920's.  Eventually in 1928, sufficient funds were raised (together with existing funds and a mortgage loan) to acquire Property B.  The ledgers of the Seung Kung Mo Kuk contain records of the funds used for this acquisition (exhibited as TKW-15).  Property B was acquired in the names of 5 persons (whose successors have been made the 13^th - 16^th Defendants) as joint tenants.  Subsequently a Declaration of Trust was executed by 3 of these 5 persons which I will refer to later in this judgment.

From the Seung Kung Mo Kuk to the Sam Shui Tung Heung Association

24.  According to Tsin Kin Wai’s affirmation (para. 11), by 1941 the Seung Kung Mo Kuk comprised members from various fields and professions.  To reflect this, the Seung Kung Mo Kuk was expanded and the name 三水同鄉會 Sam Shui Tung Heung Association (i.e. Sam Shui Natives Association) was adopted.  There is no evidence that the Seung Kung Mo Kuk was formally dissolved.  Alterations in the name, affiliation and qualification for membership of an existing club do not of themselves result in its dissolution (Abbatt v Treasury Solicitor [1969] 1 WLR 1575, C.A).

Acquisition and Declaration of Trust of Property C

25.  On 30 November 1948, Property C was acquired in the names of 3 persons (whose successors have been made the 1^st - 3^rd Defendants) as joint tenants.  On the same day, they executed a declaration of trust which recited that the property was in fact purchased with money belonging to, and for and on behalf of, Sam Shui Tung Heung Association.  The 3 persons declared that they held the property in trust for the Association. 

Beneficial interest in Property C

26.  Pausing there, it is clear from the earlier discussion of the law (paras 16-17)  that this trust did not fail as an object trust or for perpetuity as it was for the benefit of the members of the Association, subject to their contractual rights and liabilities towards one another as members of the association.

Declaration of Trust for Property B

27.  We have earlier seen how the declaration of trust for Properties A was executed 25 years after it was acquired.  As for Property B, a declaration of trust was executed 26 years after it was acquired.  It was recited in the declaration of trust dated 12 November 1954 that of the 5 persons who were joint tenants, 2 had died.  There is no evidence to contradict this.  The 3 survivors said in the recital that Property B was purchased with money belonging to, and for and on behalf of, the Sam Shui Natives Association (三水同鄉會) and declared that they held the Property upon trust for “all the members for the time being of the said Association”.

28.  Again, these words must be understood in light of the facts recounted above.  The name Sam Shui Natives Association was not even known in 1928 when the property was acquired.  Indeed Tang Cheuk Wan (one of the joint tenants who executed the declaration of trust for Property B) had himself recorded in his historical account that the purchase money was provided by the Seung Kung Mo Kuk in 1928-9.  By declaring a trust in favour of Sam Shui Natives Association, Mr Tang (and the other joint tenants) could only have meant that the property had been purchased with money of the unincorporated association called Seung Kung Mo Kuk which by the time of the declaration of trust in 1954, was now called  Sam Shui Natives Association. 

Beneficial interest in Property B

29.  Again, for reasons discussed earlier, this trust did not fail as an object trust or for perpetuity as it was for the benefit of the members of the Association, subject to their contractual rights and liabilities towards one another as members of the association.

Incorporation of Sam Shui Natives Association

30.  In 1960, the Sam Shui Natives Association was incorporated.  The first object for which it was established was “to take over the assets of the unincorporated association known as Sam Shui Natives Association”.   As it was incorporated under s.21 Companies Ordinance, revised edition 1950 (which applied to charitable and other companies with special attributes), the Governor dispensed with the word “limited” in the company’s name.  

Beneficial holding of properties

31.  Looking back therefore at the way in which Properties A, B and C have been acquired, the evolution of the essentially charitable association the Dun Yee Tong into the Seung Kung Mo Kuk (with both non-charitable and charitable purposes), the change of name of the Seung Kung Mo Kuk into the Sam Shui Tung Heung (or Natives) Association and its eventual incorporation as the Plaintiff, in my view the judge fell into error when he dismissed the entirety of the Plaintiff’s claims on the ground that it “was simply not yet in existence at the material time(s)” (para. 23).  Accordingly I agree with that part of Mr Edward Chan SC’s submission when he said that essentially the Dun Yee Tong, Seung Kung Mo Kuk, and the Sam Shui Tung Heung (or Natives) Association could be considered as the same unincorporated body evolving as the membership grew, which was then incorporated as the Plaintiff. 

32.  With respect to counsel, I do not consider that the Statute of Frauds poses a problem.  The legal title to all the properties has never been transferred out of the names of the original registered owners.  As for the beneficial interest, the Statute of Frauds applies only when there is an assignment or transfer of beneficial interests.  There is no assignment or transfer of beneficial interests simply by the change of membership of an unincorporated association, whether by the admission of new members or the death or expulsion of existing members.  Individual members have no realisable rights in the property until dissolution. 

33.  In Abbatt v Treasury Solicitor, the Court of Appeal was concerned with a club of old war comrades which was formed shortly after the First World War and affiliated to the British Legion.  Two properties were bought with the club funds.  After the Second World War, there was diminishing interest in the British Legion.  In 1954 a special meeting was called but only 15% of the members attended.  By a majority they voted to disengage from the British Legion and to become affiliated to the Working Men’s Club and Institute Union.  In the following years, the membership increased.  In 1960 one of the properties was sold.  The purchasers raised a requisition about the beneficial ownership of the property.  Proceedings were instituted to determine whether the property was held (a) for the Crown as bona vacantia, or (b) the members of the club at the date of the meeting in 1954, or (c) the members for the time being of the club, and on what terms.  

34.  The Court of Appeal held (p.1583):

“ In considering the question, it is as well first to remember the property rights of the members.  In 1954 the property rights of the individual members were simply these: they had no separate rights so long as the club continued to be a going concern.  The property had to be managed and applied for the benefit of the members as a whole.  The individual members would only have any realisable rights in the property if and when the club was dissolved.  Then they would have a beneficial equitable joint interest in the property, so that upon dissolution it was to be sold and divided equally between them.  In the present case there was no dissolution of the old club.  The property rights remained unaltered”.  (Emphasis added).   

It was held that the properties and proceeds of sale were held by the trustees on trust for the members of the new club (the club affiliated to the Working Men’s Club and Institute Union) as there had been no dissolution of the old club (the club affiliated to the British Legion), and that the property rights of the members of the old club were the same after as before the change to the new club (despite changes in membership). 

35.  In light of the evolution (not dissolution) of the Dun Yee Tong, Seung Kung Mo Kuk and the Sam Shui Tung Heung (Natives) Association and its incorporation discussed in detail above, it follows that the beneficial interest of the properties in this case lie with the Plaintiff, save that Properties A are held for the charitable purpose of the relief of the poor with surplus funds left over after the trust of imperfect obligation of the maintenance of the Yee Chung (as discussed in detail above).

Use of Properties

36.  That being my finding, it is not necessary for me to deal with the Plaintiff’s alternative claims under adverse possession through use of the properties.  I would further add that we did not permit Mr Chan to advance his “estoppel by convention” argument as it had not been argued below and the argument involved mixed fact and law.  

Order

37.  I would allow the appeal and give an order in terms of the Originating Summons amended to read as per the Notice of Appeal as follows: an order that the Plaintiff is the beneficial owner of the properties referred to in the Schedule to the Originating Summons of this action save that for Properties A, they are held for the charitable purpose of the relief of poor persons from the Sam Shui District with surplus funds left over after the trust of imperfect obligation of the maintenance of the Yee Chung, and an order for the vesting of the properties referred to in the Schedule to the Originating Summons of this action on the Plaintiff.  As for costs, it has been agreed between the parties that the Plaintiff would not be asking for costs should it succeed on appeal and that it would indemnify the Official Solicitor for the costs he has incurred.

Hon Sakhrani J

38. I agree with the judgment of Yuen JA.