Ma Wah Yan and Others v. Dharma Realm Buddhist Association, Inc. and Others

CACV 179/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 179 OF 2016

(ON APPEAL FROM HCA NOS 1190, 1191, 1192 AND 1193 OF 2007)

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BETWEEN

AND BETWEEN

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(Consolidated by the Order of Master J Wong dated 18^th July 2012)

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.By a summons of 15 November 2016, the Plaintiffs sought leave to file a Respondent’s Notice out of time in this appeal. The appeal stems from the judgment of Au Yeung J of 3 August 2016 in HCA 1190 to 1193 of 2007. The 1^st Defendant lodged an appeal by a notice of appeal of 28 August 2016. On 23 February 2017, after hearing counsel, we dismissed the summons with costs. Here are the reasons for our decision.

2.The proposed Respondent’s Notice challenged the judge’s finding that the Lantau Properties were held by Priest To Lun, deceased, for charitable purposes instead of his own beneficial interest.  This part of the judgment was not challenged by the 1^st Defendant in the notice of appeal. 

3.The rule requires a respondent’s notice to be served within 21 days from the service of a notice of appeal.  It is clear from the provisions of Order 59 Rule 6(1) that it is applicable to a case where a respondent actually mounts a cross-appeal, viz challenging a part of the judgment which is not challenged in the notice of appeal.  Thus, Rule 6(1)(c) refers to the raising of a contention by way of cross-appeal that the decision of the court below was wrong in whole and in part and the respondent’s notice must specify the precise form of the order that the respondent asks this Court to make. 

4.In the present case, bearing in mind the summer vacation, subject to the effect of the legal aid stay, the Plaintiffs could serve a Respondent’s Notice on or before 21 September 2016 without leave.

5.Legal aid application was made and on 12 September 2016 a notice of such application was lodged.  Thus, the legal aid stay of 42 days came into operation.  That stay expired on 24 October 2016. After that, time continued to run again.  Since 11 days elapsed before the legal aid stay took effect, the Plaintiffs had another 10 days from 24 October 2016 to file a Respondent’s Notice. 

6.In other words, the Plaintiffs could have filed a Respondent’s Notice within time by 3 November 2016 without leave.  The Plaintiffs did not do so because legal aid was only granted on 8 November 2016.

7.Though the delay is a short one (the summons was taken out on 15 November 2016), in accordance with settled practice, the court shall consider the following criteria in deciding whether extension of time should be granted:

(a) Length of delay;

(b) Explanation for the delay;

(c) The merits of the intended appeal;

(d) Prejudice to the other party.

8.The Plaintiffs referred to the time taken for the application for legal aid to account for the delay.  This Court had said in a number of judgments that a litigant relying on the time taken for legal aid as explanation for delay must give an account of the time taken in that process, see BI v Director of Immigration [2016] 2 HKLRD 520 at [131]; 黃得煒與懲教署署長 HCMP 1491/2016, 4 November 2016; 黃得煒及懲教署署長 HCMP 1246/2016, 18 July 2016; AIA International Ltd v Lam Che Wah HCMP 1107/2016, 27 June 2016.

9.In the present context, there was no explanation as to why the Plaintiffs could not have made the application for legal aid before 12 September 2016 if they were serious about challenging the judge’s conclusion on the nature of Priest To Lun’s holding of the Lantau Properties.  The court vacation does not afford any excuse to the Plaintiffs in that regard.

10.The Plaintiffs also said that the beneficiaries of the estate were in Heilongjiang and the lawyers could not act without authorization from the Director of Legal Aid.  With respect, there seems to be confusion as to the role of the Plaintiffs as executors of the estate and the role of Mr Ma as a partner in the solicitor firm acting for the Plaintiffs.  Mr Ma in his capacity as one of the executors should be able to assess for himself whether it is in the interest of the estate to pursue an appeal against the findings regarding the Lantau Properties. There is no reason why he should wait for instructions from the beneficiaries in Heilongjiang. 

11.On the whole, we did not find the explanation for the delay to be satisfactory.

12.In the circumstances, we should not grant extension of time unless the intended appeal has a real prospect of success, see SJ v Hong Kong Yaumati Ferry Co Ltd [2001] 1 HKC 125.

13.The main ground advanced by Mr Miu on behalf of the Plaintiffs under the proposed Respondent’s Notice was that the judge had misapplied the principle in Cheung Man Yu v Lau Yuen Ching [2007] 4 HKC 314.  Counsel accepted that had Priest To Lun as absolute beneficial owner of the Lantau Properties dedicated the same to be used as a Buddhist monastery (thereby using it for a public charitable purpose), the principles in Cheung Man Yu would apply and the land would be held under a public charitable trust even though there was no written declaration to that effect.  However, Mr Miu submitted, in the present case, the judge could not have found Priest To Lun becoming the absolute beneficial owner because there was no evidence as to the dates of death of the Beneficiaries named in the Deed of Gift [“the Beneficiaries”].  Since the Lantau Properties were held in accordance with Clauses 1 to 6 of that Deed pending the demise of the Beneficiaries, the judge erred in applying the principles in Cheung Man Yu in such circumstances.

14.The judge’s reasoning in coming to the conclusion she did was set out at Section M of the judgment at [73] to [104]. The judge recited the background to the gift of the Lantau Properties to Priest To Lun at [73] to [74].  Priest To Lun approached the donor seeking the gift to develop a monastery over the land and the purpose of the monastery was to advance Buddhism.  The judge then referred to the actual use of the Lantau Properties after the gift: Priest To Lun did set up the Tsz Hing Monastery over the Lantau Properties together with the land at RP of Lot 5.  The judge found that the several pieces of the land procured by Priest To Lun were intended to be used as one single establishment for the purpose of advancement of Buddhism.  At [103] the judge made these observations regarding the intention of Priest To Lun:

“ (a) For 40 years up to 1995, the Tsz Hing Monastery had stood on 2 lots of land from different sources, of which Lot 5RP was not bound by the Deed of Gift.

(b) In view of the Layout, it was inconceivable that Priest To Lun would have intended that the Tsz Hing Monastery should be severed so that the part that stood on Lot 5A would be reverted to him when all the Beneficiaries have died, whereas the other part would remain subject to a charity.

(c) Priest To Lun’s stated intention in the Deed of Gift to advance Buddhism was not limited in time.

(d) He devoted his lifetime to preaching Buddhism.

(e)   Reverend Heng Sure’s evidence was that Priest To Lun had always taught that the monasteries and Buddhist Lecture Hall did not belong to him or any individual.  For 40 years, Priest To Lun acted what he taught in not asserting personal right over the Tsz Hing Monastery.”

15.Based on these observations, the judge concluded at [104]:

“ The Tsz Hing Monastery satisfies the 3 criteria in Cheung Man Yu, §24, as being built for a charitable purpose, ie for advancement of Buddhism. It was open to the public and was for the benefit of the public. It was exclusively charitable, past and present, including its incidental use by a resident nun. Applying Cheung Man Yu, §45 Priest To Lun had created a charity even though there was no declaration of trust for the period beyond the express trust. It was not a case of a landlord lending out his property temporarily for a charitable purpose. I find that the Lantau Properties was and is bound by that charity even beyond the period of the express trust and regardless of Clause 7.”

16.In our judgment, there is no reason why the principles in Cheung Man Yu could only be applicable if the 1^st Defendant established that Priest To Lun had become the absolute beneficial owner of the Lantau Properties before dedicating the same to public charitable purposes.  Mr Miu himself classified the restrictions in Clauses 1 to 6 in the Deed of Gift as contractual obligations, see [75] of the judgment.  For present purposes, we are prepared to regard these clauses as restrictive covenants.

17.What is significant is that there was nothing in these covenants which prevented Priest To Lun from setting up Tsz Hing Monastery on the Lantau Properties for public charitable purposes provided that the obligations in those covenants were observed during the lifetime of the Beneficiaries. 

18.Mr Miu did not cite any authority to support a proposition that the incidence of some obligations in the Deed of Gift on the use of the land would prevent a public charitable trust from coming into existence (notwithstanding such obligations are not inconsistent with the public charitable purpose to which the land was dedicated).

19.At the hearing, Mr Miu referred to the condition subsequent at the end of the Deed of Gift which required Priest To Lun to re-convey the Lantau Properties back to the Beneficiaries should there be a breach of the covenants in the Deed of Gift. Counsel submitted that such condition subsequent prevented a public charitable trust from being created in the meantime.

20.Mr Miu cited no authority for this proposition and we could not accept the same.  As we observed above, the due performance of the covenants was perfectly consistent with the setting up of the Monastery for public charitable purpose and there was no suggestion that Priest To Lun did not intend to perform such covenants. There was no suggestion whatsoever that the covenants had not been duly performed. As such, it had to be within Priest To Lun’s contemplation that there was no scope for the occurrence of any event which would trigger the operation of the condition subsequent. In such circumstances, we did not regard the existence of that condition subsequent as a bar to a charitable purpose trust being set up as a matter of law.

21.Properly understood, the following principles are affirmed in the judgment of Tang V-P (as he then was) in Cheung Man Yu, which was substantially based on the discussion of the law on charity in the judgment of Cross J in Neville Estates Ltd v Madden [1962] Ch 832.

22.To qualify as a public charity three conditions must be satisfied, see [24] of Cheung Man Yu:

(i)    The purposes of the institution must have charitable character;

(ii)     The institution must exist for the benefit of the public;

(iii)   It must be exclusively charitable.

23.Regarding the first requirement, ownership of the property is a relevant but not determinative consideration.  In respect of property held under private name(s) for the use of an unincorporated institution, its beneficial ownership could be held in three different ways as discussed in Neville Estates Ltd v Madden, supra.  If the terms or circumstances of the gift or the rules of the association of the unincorporated institution show that the property in question is not to be at the disposal of its members for the time being, but is to be held in trust for or applied for the charitable purposes of the association as a quasi-corporate entity, like the establishment of a place of public worship, it would be a charitable trust, see [41] to [46].  In this connection, it does not matter that the donors or the title holders did not appreciate the legal consequence of the dedication of the property to such purposes. Once a charity has been set up, the legal owners cannot re-convert the property back to private ownership for non-charitable purposes.  Further, when the evidence supports the existence of a charity, the court should be not astute to find otherwise.  On the facts in Cheung Man Yu, and also in Neville Estates Ltd v Madden, the courts were able to conclude that members of the institutions could not have envisaged for a moment that the property were to be divided between the members for the time being and there was enough in the circumstances to show that the fund was to be held on a trust for or to be applied for the charitable purposes notwithstanding that there was no formal declaration to such effect by the donee and no provision in the rules of the institution to that effect, see [45] and [54] to [56] of Cheung Man Yu.

24.Regarding the second requirement, the public character refers to the institution existed for the benefit of the community or an appreciably important section of the community.  These involve consideration of two closely related questions: whether the purposes of the institution 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.  See [26] of Cheung Man Yu citing Tudor on Charities.  A religious institution set up for the sole benefit of members of a priory live in seclusion was therefore not a public charity (as held in Gilmour Coats [1949] AC 426).  However, a religious institution set up as a place of public worship by persons who live in the world and mix with their fellow citizens would be a public charity as the court is entitled to assume that some benefit accrues to the public from the attendance of such worship.  See [72] and [73] of Cheung Man Yu citing Neville Estates Ltd v Madden, supra. 

25.Regarding the third requirement, the use of part of the property for private accommodation, serving of vegetarian meals and the installation of ancestral tablet at a fee could be incidental, ancillary or auxiliary to the charitable purpose and it would not be inconsistent with the charitable character of the institution, see [60] to [70].  In this connection, Secretary for Justice v Joseph Lo Kin Ching (2015) 18 HKCFAR 169 at [11], [67] to [72] (see also discussion in the Court of Appeal’s judgment in CACV 44 of 2013, at [92] to [116]) provides another example of the court holding that a charitable trust was established notwithstanding that there were provisions in the will for the exercise of fiduciary powers for private purposes. 

26.The judge clearly had these principles in mind when she examined the case regarding the Lantau Properties. 

27.It is also noteworthy that the judge said the following at [74] after referring the terms of the Deed of Gift:

“ On a proper interpretation, these clauses showed that Priest To Lun was the initiator who asked for the gift. The gift was made to him in the capacity of a monk using his name To Lun. The common intention of both the donor and the donee was that it was not an outright gift but that there was an express trust to carry out a charitable purpose subject to the life interests of the Beneficiaries…”

28.As a matter of fact, the Deed recited such common intention:

“ the Grantor has been approached by the Donee with the project of developing the [Lantau Properties] into a monastery for the advancement of Buddhist religion which the Grantor has agreed to do so …”

Clause 6 of the Deed provided:

“ That during the respective lifetimes of the Beneficiaries the Donee shall only use the [Lantau Properties] and/or any building erected thereon for the sole purpose of advancing the Buddhist religion and not otherwise.”

29.Hence, it was indeed the common intention of the donor and Priest To Lun that a Buddhist monastery for public worship was to be established on the land.  The life interest of the Beneficiaries included the right of access and egress over the land, the absolute use and enjoyment of one room on the first floor of the building and provision of food and lodging whenever they resided at the building.  These activities were perfectly consonant with the public charitable character of the monastery. 

30.The judge went on to at [74] (obviously with reference to Clause 7 of the Deed of Gift):

“ After the death of all the Beneficiaries, Priest To Lun would be free to use the land in any way he liked.”

31.However, after examining all the circumstances surrounding the disposition as well as the history of Tsz Hing Monastery, she concluded that a charity, viz a monastery for public worship, had indeed been set up by Priest To Lun and the 3 criteria for public charity were satisfied.

32.Mr Miu failed to persuade us there is any real prospect of succeeding in the argument that the judge came to a conclusion which is plainly wrong regarding the charitable nature of Tsz Hing Monastery.

33.At the hearing, Mr Miu made the further point that since Priest To Lun was obliged under Clause 6 of the Deed of Gift to use the Lantau properties as a monastery for the advancement of Buddhist religion, his conducts before the demise of the Beneficiaries were equivocal and one cannot therefore apply the Cheung Man Yu principles to conclude that a charitable trust had been set up.

34.That point might have some force if Tsz Hing Monastery was set up solely on the Lantau Properties. But that was not the case. The judge quite rightly placed significance on the fact that the Monastery was set up on the Lantau Properties together with land otherwise acquired and concluded by reference to the layout of the Monastery that Priest To Lun could not have intend that the portion of the Monastery situated on the Lantau Properties could be segregated and used for other purposes after the demise of the Beneficiaries. 

35.The other intended ground of appeal is a pleading point.  However, as apparent from the judgment, Mr Miu was clearly alive at the trial to the possibility of the judge examining whether the Lautau Properties were subject to a charitable trust and had advanced arguments which he sought to repeat before us.  There was no protest before the judge for the point being considered and no request for adjournment or admission of further evidence before the judge.  Thus, it is simply too late for the pleading point to be taken only after the judge had reached a conclusion unfavourable to the Plaintiffs.

36.For these reasons, we did not see any merit in the intended cross-appeal by the Plaintiffs.

37.Though it can be said that not much prejudice had caused to the 1^st Defendant by the delay, this alone cannot justify extension of time being granted for an unmeritorious cross-appeal to be brought.

38.In the circumstances, we refused to grant the extension of time and dismiss the summons of 15 November 2016 accordingly.

39.We also ordered the Plaintiffs to pay the costs of the 1^st Defendant in the summons and having considered the statement of costs, we fixed such costs at $82,500. The Plaintiffs’ own costs should be taxed under the Legal Aid Regulations.

Mr Nelson Miu, instructed by Hobson & Ma, for the plaintiffs (by original action)

Mr Richard Yip, instructed by Y.C. Lee, Pang, Kwok & Ip, for the 1^st defendant (by original action)

Department of Justice, for the 2^nd defendant (by counterclaim), absent